Packaged Foods: The Guy Shorting Kellogg's (K; Gis; Cpb)

With Campbell Soup, together with their Dan Loeb-activist drama, reporting earnings tomorrow it appears the brand-name nutrient companies are drawing attention.
We get got or thus sense amongst theses things.

From Institutional Investor, Nov 15:

Cereal Killer

Short-seller Eiad Asbahi has tangled amongst the likes of Warren Buffett. Now, amongst his large bet against Kellogg, he’s going upwards against or thus other American icon.

In tardily 2016, short-seller Eiad Asbahi was riding high. His tiny hedge fund, Prescience Point Capital Management, had zigzagged its agency to an annualized provide of nearly 29 pct since 2009. Asbahi cranked out thick inquiry reports skewering roll-ups, China-based frauds, together with other flawed businesses his fund bet against. He bested Warren Buffett past times shorting Chicago Bridge & Iron Co., a structure companionship amongst questionable acquisition accounting that the Berkshire Hathaway principal executive was unwise plenty to invest in.

On the morning time of Nov 9, however, Asbahi’s wagers went awry. With the surprise election of Donald Trump, it was clear fiscal rule was going out the window. Suspect companies that Prescience Point was shorting similar automobile lender Credit Acceptance Corp., nether investigation past times authorities, soared inwards the weeks afterwards the election. The fund lost 31 pct for 2016, its solely calendar-year deficit.

“We were caught naked,” says Asbahi, 39, inwards his sumptuous component overlooking an upscale commercial strip inwards Baton Rouge, Louisiana. “Politics affair to the type of investing nosotros do, together with they tin affair inwards a real large way.”

Asbahi did non push clitoris inwards his horns. He continued to boom companies amongst searing research. The motion has paid off: His fund is on a tear, upwards 41.3 pct internet of fees yr to appointment through October. 

Asbahi raised the stakes on Apr 26, unveiling Prescience Point’s highest-profile brusk crusade yet. He published a 39-page study on cereal juggernaut Kellogg Co., pointing out that several recent accounting together with operational moves were artificially bolstering revenue, understating companionship debt, together with padding operating margins.

Kellogg’s maneuvers are spelled out inwards the company’s fiscal filings, he notes. By extending payment terms for customers, Kellogg is encouraging them to purchase to a greater extent than straightaway than they usually would, Asbahi argues. Eventually the buyers volition postulate to rein inwards their purchases.

And Kellogg is also slowing its payments to suppliers, temporarily bolstering operating cash flow. Soon, it has to stop.
“We facial expression that they volition get got to pay the piper,” Asbahi says. “Accounting excesses ever unwind.”

Prescience Point forecast that Kellogg shares, thus trading at $60.95, would autumn past times to a greater extent than than a 3rd to Asbahi’s target of $39.50.

Asbahi aired his pitch on Bloomberg Television. “The companionship is a lot less profitable, much to a greater extent than expensive, together with much, much to a greater extent than highly indebted than the fiscal statements convey,” he said. “It won’t last able to encounter its guidance targets, together with it’s going to last forced to determine whether it wants to cutting its dividend or keep its credit rating.”

Kellogg stock dropped 7.1 pct over the adjacent week, to $56.65. Shares thus rebounded, climbing to $74.84 past times mid-September.

Asbahi was sanguine — inwards a September missive of the alphabet to investors, he wrote that the fund had doubled its brusk seat when Kellogg’s portion cost hitting $74. On Oct 31, Kellogg announced that higher expenses inwards component due to the rollout of single-serve Pringles together with Cheez-Its, combined amongst higher transportation costs, would effect inwards apartment operating margins. It sharply lowered earnings guidance too. The stock brutal nine percent, to $65.48....

...MORE

The outset fourth dimension I read most the unmarried serve Pringles I idea they were referring to individually-wrapped crisps, kind of an industrial potato-flour extrudate/artisanally-wrapped fusion thing.

Previously on the "Is it actually food" channel:
March 7, 2017
M&A In European Food

I'm non certain that consumer packaged goods is the expanse to last in, at to the lowest degree non inwards the US of America together with non based on names similar Kellogg or General Mills.
For a quarter-century those manufacturers ratcheted prices every bit though they were tobacco companies but people honor it easier to laissez passer on upwards their Cheerios than their cigarettes.
The managements milked that approach for pretty much all it was worth so, every bit operating entities, they aren't all that attractive but someone volition determine the solely thing left to produce is to property strip or dividend recap the life out of the onetime cash cows.
Top o'the marketplace seat to ya.... 

Sept. 7, 2018  
Packaged Goods: So, What's New at Campbell Soup? (CPB)
August 30
Packaged Goods: ""Why 149 year-old Campbell Soup is at a crossroads" (CPB)
May 18, 2018
More Trouble In US of America Packaged Food: Campbell Soup Down 12% (CPB; GIS; K)
For the final duo years we've been using Kellogg together with General Mills every bit proxies for the group:
Kellogg

FinViz

General Mills

FinViz

The problems yet extend through the entire sector.

 FinViz

May 3 
The Disaster That Is American Packaged Food (K; GIS)

Not talking nutrition here, simply shareholder wealth destruction.
We've been posting on the turn a profit potential on the brusk side for the final duo years together with things get got solely gotten worse for the onetime giants over the final few months:...

The David Says Eat More Packaged Food (and brusk the stocks)
Packaged Goods: "...America's Venerable Food Brands Are Struggling"
Nine of the World's Biggest Packaged Food Companies Have Launched Venture Capital Units
"Hungry for Investment: Big Food Races Toward Startups"
Dealflow: "New Investors Flock To Food"

And many more. Use the 'Search blog' box if interested.