Post Holdings (POST) has been on a long trip over the years. And as the old saying goes, ‘the more things change, the things stay the same.’
Post and Kellogg‘s (K) were the major forces in introducing ready-to-eat breakfast cereals to the American public in the late 19th century.
It’s a fascinating story.
The History of Post
In 1892 Henry Perky, with his friend Henry Ford (yes, that Henry Ford) invent a machine that can shred wheat. They start a shredded wheat cereal.
In 1895, C. W. Post makes his first batch of Postum, a cereal beverage, in Battle Creek, MI (the cereal capital of the world), and gets into the cereal game.
Post is credited with launching one of the first all-natural, ready-to-eat cereals — Grape Nuts — to the general public in 1897. He then went on to launch so many brands synonymous with so many childhoods (and adulthoods) — Raisin Bran, Honeycomb, Fruity Pebbles, Honey Bunches of Oats and more.
It started a booming industry that continues today. In the U.S., breakfast cereal is about a $10 billion a year business in a breakfast industry (including fast-food breakfasts) that rings in about $47 billion a year.
Seeing the opportunity early on, Post’s son-in-law, the famous brokerage legend E. F. Hutton, suggests Post consolidate various brands (competitors and his own) under one company they named General Foods.
In 1985 General Foods was sold to Philip Morris (MO) and moved into its food business but wasn’t paid much attention.
Then in 2012, Post was again spun out of the shadows of its former owners and was back in business with its strong portfolio of brands.
And since then, it has been growing by acquisition at a blazing pace.
Keeping Up With the Times
Research shows that the breakfast cereal market has been slowing in recent years, so POST has been diversifying into eggs, ready-to-prepare potatoes (Simply Potatoes), nutritional bars (PowerBar) and other complimentary products and sectors.
The good news is, its M&A activity is paying off. In its recent quarter (the fourth quarter, reported on Nov. 23), revenue was up almost 26% over the same quarter last year. For the fiscal year, net sales were up 93%.
Even with the cold cereals sector slowing down, it can lean on these other sectors to grow. What’s more, because commodity prices for corn and other grains are so low, POST’s margins are still strong.
The stock has reflected POST’s newfound energy; it’s up 58% year to date. Remember, we’re talking about a consumer goods company here, not a small biotech stock.
This kind of growth and attention from institutional is very encouraging. It means Wall Street likes the path POST is on and is willing to buy in for the ride.
The other good thing about this is, a company with such a long American pedigree isn’t a flash in the pan. POST knows how to build for the long haul.
And now that it is unshackled from a massive multinational conglomerate, it’s proving its plan works.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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