Analyst Note| Erin Lash, CFA |
In a sector where undervalued opportunities are few and far between, we think investors should consider snacking on wide-moat Kellogg, which trades 25% below our $82 fair value estimate and boasts a 4% dividend yield. Kellogg has benefited from pandemic-related gains in the retail channel (which drives 90% of its sales) as consumers continue to spend more time at home, chalking up mid- to high-single-digit organic sales growth over the past few quarters. However, shares haven’t popped. In this vein, Kellogg's stock was down 7% during calendar 2020, which pales relative to the 14% gain the Morningstar U.S. Consumer Defensive Total Return Index clocked over the same period.