Read Disclaimer
Barron's is an American weekly newspaper published by Dow Jones & Company, a property of News Corp. that covers US financial information, market developments, and relevant statistics. Each issue provides a summary of the previous week's market activity as well as news reports and an informative outlook on the week to come. The Top 100 Independent Advisors as identified by Barron’s is published annually. Scoring for the publication reflects the assessment of data provided by the nation’s most productive advisors. Investment performance is not an explicit component because not all advisors have audited results and because performance figures often are influenced more by clients’ risk tolerance than by an advisor’s investment-picking ability. Barron’s states that ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices. Furthermore that the scoring systems assigns a top score of 100 and rates the rest by comparing them with the top-ranked advisor. Anchor Capital did not provide data to Barron’s to be included in this assessment and receipt of this designation is no way indicative of any individual client or investor’s experience with the Company or of any client, investor or fund’s future performance. Anchor Capital is not affiliated with Barron’s in any way.

Mondelez International

MDLZ: NASDAQ

You may know Mondelez from its iconic brands, including Oreo, Ritz, Triscuit, Chips Ahoy, Cadbury and Trident. It is headquartered in Deerfield, IL and was spun out of Kraft Foods in 2012.[1] Mondelez is one of the largest pure-play global snacking companies with $26B in revenue.[2] Just 24% of company sales are in the U.S. with the balance in Europe, South America and Asia.[3]

Investment thesis

Mondelez’s new CEO, Dirk Van de Put, started in January 2018 and comes from McCain Foods where he grew net sales by more than 50% in his CEO role. [4] We believe that he will be able to launch Mondelez into a new phase of growth supported by category trends and disciplined cost cutting initiatives. The $1.3T global snacking market has grown at a 3-5% average rate the last six years and is expected to continue, supported by emerging market growth and snacking trends. [5]

Confirmation through research

Data shows that in the U.S., over 50% of all eating occasions are snacks and nearly half of U.S. consumers replace meals with snacks. [6] We think Mondelez should grow at least with the category. The company is especially focused on its Power Brands, those that generate more than $1B in sales, including Oreo, Chips Ahoy, Ritz, belVita, Cadbury, Toblerone, Trident and Halls. We see an opportunity for Mondelez to expand distribution beyond the traditional grocery channel to e-commerce, which we believe could be a $1B business by 2020.

The company is also bringing more innovation to its healthy snacks business and is rationalizing SKUs to drive higher margins.[7] Since the IPO, Mondelez has delivered $1.5B in gross savings but we believe there is still more opportunity in global shared services and supply chain, including consolidating plants and suppliers.[8]

Variant Perception

We believe the stock has been pulled down with the consumer packaged goods (CPG) industry as headwinds, including heightened freight and commodity costs and private label pressure, continue to make headlines. We think Mondelez stands out from the crowd as it stems operating margin erosion with its cost savings initiatives. Further, food inflation is starting to turn, which allows Mondelez to increase prices after years of deflation.[9] While private label continues to take share in food, Mondelez has maintained its 70% share in biscuits and chocolate and is insulated from private label in the snacking category.[10]

The company expects to generate $2.8B in 2018 free cash flow and we think it can generate $3.7B by 2020, which will be used to reduce debt, buyback shares, pay dividends and make strategic acquisitions.[11] Mondelez has returned over $18B to shareholders since its spin off and has reduced original share count by 20% and we expect those amounts to grow with higher future free cash flow.[12]