A Flake of Comfort

Who would have thought Cheerios could be more profitable than investment banking? While the overall market plunged 4 percent in a single day recently, General Mills (NYSE: GIS) served up a solid quarterly earnings report.

But while net sales grew by 14 percent, earnings dropped by 3.6 percent. The gross profit margin dropped by 1 percentage point, too, as the cost of goods sold exploded by 20.3 percent.

Commodity prices are pinching margins. In response, management is hiking prices, while expecting increased earnings. With a forward price-to-earnings (P/E) ratio around 18.5, the stock price might appear steep, but the company has spent more than $500 million repurchasing shares, suggesting that General Mills might just be sitting at an attractive price.

Food companies are becoming more attractive to many investors, offering reliable revenue growth and palatable earnings through a challenging commodity market. General Mills has averaged 11 percent annual gains over the past five years, with a dividend yield recently around 2.5 percent.

Of course, it's important to pick your foodies wisely. Some, such as ConAgra, are struggling to keep up with commodity increases. General Mills may not be glamorous, but it is delivering the comfortfood satisfaction that weary investors are craving in this crazy market.