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Stock Strategist

Sweet Snacks and Shares Worth Savoring

We've bumped up our fair value estimate for Mondelez as the firm's cost savings take hold.

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From our vantage point, patient, long-term investors would be wise to consider building a position in  Mondelez International (MDLZ), which trades at an attractive discount to our fair value estimate, with a price/fair value of 0.89. The firm invests to support its brand intangible asset, spending nearly $2 billion, or 6% of annual sales, on research and development and marketing. This spending is yielding measurable improvements, as sales generated from new products launched in the past three years amounted to 13% of total revenue in 2014, double the level of just seven years ago.

As a leading player in the worldwide snacks arena, Mondelez's portfolio includes several well-known brands, nine of which produce annual sales in excess of $1 billion, including Oreo, Cadbury, Nabisco, Trident, and Tang. In the global confectionery space, it holds 15% share of the chocolate market, 30% of the gum category, and 7% of the candy aisle. In addition, Mondelez holds dominant share of the biscuit category--controlling 18% of the market, far in excess of  Kellogg (K) (4%) and  Campbell Soup (CPB) (3%)--as well as leading the powdered beverage arena (16%). This dominance, combined with its expansive distribution platform (with 40% of sales resulting from emerging markets, 40% from Western Europe, and 20% from North America), has afforded Mondelez a wide moat.

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Erin Lash does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.