Click to Enlarge YTD Return: +21%
Although General Mills (NYSE:GIS) fared much better in the face of soaring commodity prices last year than many expected it to, 2013’s slide in food commodity prices has been an absolute boon for the Cheerios maker.
Corn prices have fallen from $7 per bushel at the end of 2012 to a current price of $6.40. Wheat has fallen from $7.93 to $6.92. As a result, shares are up more than 20% for the year so far.
Investors, assuming commodities prices will continue to deteriorate, are feeling great about the wide margins expected through the end of the year. In fact, the market might be a little too certain that commodity prices are going to sink indefinitely.
As the old saying goes, expect it when you least expect it. With falling-commodity euphoria in full swing, now’s the time we’re most apt to see corn and wheat prices reverse higher. When they do, General Mills will be one of the first names dumped.