Kellogg's Pension Accounting Should Concern Bulls
Geoff Abbott submits: We always scour the universe of prospective investments for companies with durable business models, strong operating track records, and high quality brands. These criteria led us to investigate the shares of Kellogg Company (K). Not that we need to remind anyone, but Kellogg produces some of the most ubiquitous cereal brands in the world: Special K, Frosted Flakes, Kellogg's Raisin Bran, Froot Loops, Corn Pops, etc. The company also makes Pop Tarts, Famous Amos cookies, and many other treats. Kellogg's sales have grown steadily, and the company has been consistently profitable for a long time. I'm sure Kellogg bulls would argue that a 16x P/E multiple is perfectly reasonable for a company of this quality, especially because the shares currently pay a 3% dividend. You won't do much better than 3% investing in high-rated bonds right now, and you get the upside of a terrific franchise when you buy K. However, there is one problem lurking in the fine print of Kellogg's filings that will force us to stay away from the shares.Complete Story »
- Original article
- Login or register to post comments
