DEAR MR. BERKO: What is your opinion of General Mills? The stock has moved up 20 percent since Warren Buffett took over Heinz. Do you think Buffett also will make a play for General Mills? Do you think another player will take over the stock? I'll buy 500 shares if you think there's a good chance that it is a takeover target. What do you think a good takeover price would be if it were to happen?
TJ, Jonesboro, Ark.
DEAR TJ: If General Mills were to be bought out, I think a good takeover price would be about $185 to $235 a share. And I'm certain as can be that most shareholders would welcome that price. You and lots of other stupids think alike. I am sure Warren Buffett has his hands full with Heinz and doubt he has an interest in General Mills other than his daily breakfast of Lucky Charms or Cinnamon Toast Crunch.
General Mills (GIS-$49.12) is Betty Crocker, Bisquick, Cheerios, Gold Medal flour, Green Giant, Haagen-Dazs, Hamburger Helper, Nature Valley, Pillsbury, Progresso, Wheaties, Yoplait and other delectable, devilishly delightful consumables that put $16.5 billion of revenue on the 2012 income statement. As an investment, this company is a no-brainer.
The CEO makes only $2.9 million; the CFO makes $1.3 million; and those in management appear infinitely more interested in growing their company than they are in growing their egos. Because there are only three lawyers and no congressmen on the board of directors, there are no union troubles or lawsuits for fraud, unfair competition, product dumping, false advertising, insider trading, kickbacks or tax problems.
GIS is a clean company, an American icon that produces good products, and those products produce solid long-term results for shareholders. The company has a clean balance sheet, a fine income statement and good valuation ratios. But if you are in a hedge fund hurry, seeking an angle or hoping to buy low and sell high, GIS will bore you to tears.
However, this reliable pale blue chip company, which began selling Gold Medal flour in 1880, will fit like a comfortable slipper in the long-term growth portfolios of intelligent investors.
In the past decade, GIS steadily has improved revenues from $7.8 billion to $16.6 billion, grown earnings from 85 cents to $2.51 a share and increased the dividend from 55 cents to $1.22, and its book value has gone from $4.87 to $9.95.