We have been raking in huge profits in all our cyclical and aggressive plays since we called the turnaround in Brazil last October 27:  Petroleo Brasileiro (NYSE: PBR) — known as Petrobras – Vale (NYSE: VALE), Apple Inc. (Nasdaq: AAPL), BHP Billiton Ltd. (NYSE: BHP), Research in Motion Ltd. (Nasdaq: RIMM), IBM (NYSE: IBM), Amazon.com Inc. (Nasdaq: AMZN),  Diamond Offshore Drilling Inc. (NYSE: DO), and Ciena Corp. (Nasdaq: CIEN) have all done splendid.

And over the longer term, all of these companies are going to continue delivering, with some obvious profit-taking bouts along the way.

One of such profit-taking episode could be starting right now.  And it could be driven by Standard & Poor’s recent downgrade of United Kingdom’s sovereign debt rating.  This was in turn followed by the comments coming out from PIMCO that suggest the United States’ debt rating could be in jeopardy.  Even though S&P minimized that possibility, when Bill Gross speaks, the bond markets listen.

General Mills met earnings expectations in March and raised its earnings outlook.  It has been benefiting from the drop in commodities prices, especially agricultural. In addition, the firm, like many in the consumer business, has suffered from a strong U.S. Dollar, which reduced the value of the profits abroad.  The nice thing about consumer staples is that, since people have to eat in good and bad times, these companies are not cyclicals, but rather suffer very little in downturns.

That has been the case for General Mills, which in the last report showed a 4% sales increase from the same quarter in the prior year.  And this sales increase was achieved despite a 6% drop in the sales of food service and bakery products, where the firm nonetheless managed to increase pricing.  But this sector is being de-emphasized with some divestment.

Just think about the solid brands that allow General Mills to dependably keep chugging along every quarter, increasing sales as the population grows. General Mills also boasts well established and new brands that keep increasing its market penetration around the world.   Since then, the dollar has corrected in value and the commodities prices have dropped. That will show up in next month’s earnings report and the stock should perform nicely.

The company is dominant with its Pillsbury brand, which has more than two-thirds of the market.  Cheerios, which has come under some scrutiny for health claims by the FDA, is the top cereal franchise in the ready-to-eat segment.  In addition, we are going to see hundreds of new products being launched soon.

The global story is only beginning for this company, even though they are already in China, and many other fast-growing emerging markets.  This international presence, which right now accounts for only 20% of the company’s total sales, is likely to grow much faster in the near future.  This will be achieved with joint ventures and by leveraging the brands that have the highest international penetration, like Nature valley and Haagen Dazs.

The stock is trading with a price-earnings ratio of only 16 times and an attractive dividend yield of 3.3%. But looking at the company’s growth, it is trading at only 13 times future earnings.  This is a low-risk proposition, as both the company earnings and the dividend appear to be very safe. In addition, the stock has a small short ratio that should diminish if we see profit-taking in the cyclical.

Last but not least, in addition to the short-term technical turning bullish at the end of April, as the stock crossed its 13-day and 50-day exponential averages to the upside, the long-term technicals have also turned bullish and the stock is still way oversold.

Recommendation: Buy General Mills Inc. (GIS) at the market and accumulate more if you see weakness (**).

(**) – Special Note of Disclosure: Horacio Marquez holds no interest General Mills Inc.

Source: Buy, Sell or Hold: General Mills Inc. (NYSE: GIS) is a Wholesome Company with Profit Coming Down the Pipeline

I’m convinced that if the old me met the new me, he’d want to slap me. But then again, the new me is getting paid. The old me waited for a $20 handout at the end of the week from his father.

Back to the topic at hand – take a look at the sector of the S&P 500 did the best this past year…

If you’ve just looked at this chart of the Consumer Staples Select Sector SPDR (NYSE:XLP) and thought to yourself “that doesn’t look good at all”, you’re not alone.

After all, you still would have lost about 15%. But you didn’t lose nearly as much as you would’ve had you put your money in any other sector.

For instance, you would have lost 32% had you put your money into the Energy Select SPDR (NYSE:XLE) instead. And the Financials Select Sector SPDR (NYSE:XLF) did dreadfully worse, losing about 68%.

The fact that the consumer staples have weathered this recession the best so far means that when things get better, they could be the first sector headed higher.

This from Investor’s Daily Edge:

Economists say this recession will last till June 2009 at least. Conventional wisdom says it’s time to buy defensive stocks—utilities, consumer staples, booze, healthy banks, drug companies, and defense contractors.

I’ve been walking around with my eyes open, and I don’t think so.

Last week, Andy and I went to the bank then stopped at Starbucks. There were no lines in the bank. We had to wait 10 minutes to get to the counter in Starbucks (NYSE:SBUX).

The legendary Howard Schultz is back, and so is Starbucks.

Schultz was the person who convinced the original coffee-roasting partners to expand in the 1980s when he visited them to find out why they were buying so many of the Hammerplast Swedish drip coffee makers he sold. They hired him for marketing help. But when Schultz’s best new idea was to open a coffee bar, they wouldn’t do it. Schultz quit, started his own coffee bar, and within a few years, bought the roasters out for $3.8 million and called it Starbucks.

He’s the genius who took Starbucks from one very cool Seattle store to 10,000 around the world.

If you missed that wave, catch its revival now.

This stock may be 76% off its 2006 high of $40, but it’s on the way back with Schultz at the helm.

Starbucks has been one of those growth stories that kept fooling people. At first, it was so hot everyone agreed it was going places. Cities were complaining if they didn’t have a Starbucks yet. Then it appeared to be in every town it could conquer.

So much for hot growth, though it was still a fine business, the analysts thought.

Except Starbucks’ Schultz knew better. Under Schultz’ guidance, Starbucks started putting two, three, four stores in a town…

And that seemed likely to end when the analysts noted there were corners with Starbucks stores facing each other.  Growth would slow.

Wrong again. Starbucks began sidling into the crevices, into grocery stores, bookstores, airports and little kiosks within other businesses. Growth kept rolling.

And it began going international.

Schultz, who founded Starbucks and embodied everything it stood for, retired as CEO in 2005.

But eventually growth did slow. Starbucks seemed to be courting trouble. Some of the stores weren’t selling well. In the meantime, Green Mountain (GMCR) had moved into similar niche locations and done much better at cornering the convenience store/gas station market. Dunkin’ Donuts expanded its coffee offerings. Peet’s started taking equal shares of grocery store shelf space.

Last January, Schultz un-retired. The first thing he set out to do was to restore the company’s feel. To him, Starbucks is not about coffee, it’s about the feeling of having coffee. It bothered him that when you walk into a Starbucks today, it no longer smells good. Schultz moved quickly to shut down stores that weren’t selling enough. He set out to ramp up international sales.

And he vowed to make Starbucks a real coffee place again. Grinding beans in the stores is to make a comeback. And now there’s Clover…

Clover is a special brewing system. The Clover choice costs even more than regular high-priced Starbucks. Another new system will improve on the espresso, grinding the beans for each cup, as they should be.

I expect Starbucks to recover its momentum this year. The international expansion is particularly promising. Even Starbucks-besotted Americans are pikers among international coffee drinkers.

Americans consume just over 4 kilograms (8.8 pounds) of coffee beans per person a year. The Scandinavians drink two to nearly three times as much, with Finland leading the way. The Swiss, Germans, Dutch, French, Austrians, Belgians and Italians drink 5 to 6 kilograms to our 4. Plus, Europe is like the U.S. pre-Starbucks. Coffee is sold locally, in restaurants and independent cafes.

Source: Wikipedia, consumption in kilograms per capita

So, yes, there’s a global recession on. Yes, premium coffee is a luxury compared to the can of Folgers in the supermarket. But think booze…

Spirits and beer sales usually hold up well in bad economies because they are modest luxuries. It’s not that everyone is suddenly a drunk (though some are to be sure). Rather, most drinkers consider that cold beer an affordable treat. A cup of Starbucks fills the same role in the non-alcoholic beverage world.

Will Starbucks really be the absolute best stock of 2009? Nah. Probably not. That one will probably be an out of the blue surprise. But Starbucks will be one of the great ones. I’m expecting the shares to rise 100% or more in the next year and triple in two years.

Source: A Cheap Luxury for a Dreary Economy