Jensen’s Investment Committee recently added General Mills (GIS) to the firm’s Quality Growth portfolios. General Mills is one of the world’s largest packaged foods companies, producing a wide variety of well-known branded goods, including Cheerios cereal, Yoplait yogurt, Nature Valley granola bars, Haagen-Dazs ice cream, Progresso soup, Pillsbury baking products and Blue Buffalo pet food. Many of the company’s products hold strong market positions in their respective categories. While growth in the packaged foods industry is relatively muted, demand for most of the business’ products is not highly sensitive to the overall economic cycle. Strategically, the company’s goal is to hold or gain share across all its brands, accelerate growth in faster growing product categories and to divest underperforming business units. Sales should increase over time as the business introduces new products, invests in advertising and marketing, expands into new distribution channels and grows its overseas operations. Cost savings from the company’s on-going productivity improvement plan coupled with scale improvements in its international units should drive margins higher over time. In summary, General Mills possesses many of the characteristics we look for in a high-quality business, and we are pleased to add the name to the firm’s Quality Growth portfolios at current valuation levels.
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