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Two Ways To Play: Kellogg, It's Grrrrreat!


Strengthen your portfolio in good times and bad.

Ride the Wave

According to Bloomberg, the new fad for fashion companies is in surfing. Companies like Nike ((NKE), J.Crew (JCG), and Abercrombie & Fitch (ANF) are all rushing to try and capture much of the market which reported $7.5 bln in sales in 2006. Nike's Hurley International unit, which targets the surfing/skateboarding market, reported a 33% increase in its most recent quarter.

Meanwhile, J.Crew is featuring surfing stars on the cover of its summer catalog. And Abercrombie, through its Hollister division now has more stores and higher sales per square foot than Abercrombie itself. See Professor Jeff Macke's recent column, Retail Roundup.

From the Bull Pen: Bulls can consider Nike for an upside play. Pullbacks toward the $65 level could provide bulls with an entry level.

From the Bear Cave: Bears can consider a downside play in JCG; buy-stops can be set above $37.

Kellogg's Box Reduction Program

The Wall Street Journal reports Kellogg (K) will be raising the prices of its cereal for the second time in just six months. The company spokeswoman said Kellogg will employ the strategy by reducing the sizes of cereals by an average of 2.4 ounces. The cut will affect labels including Froot Loops, Cocoa Krispies, and Apple Jacks. In a survey of Wal-Mart (WMT) stores, Longbow Research analyst Alton Stump said the size reduction strategy was virtually unnoticed by consumers. Stump also said a similar strategy by competitor General Mills (GIS) helped the company delivery price improvement of about 2 to 4 percent for the company. Professor Kevin Depew mentioned this strategy in a recent Five Things You Need To Know.

From the Bull Pen: Bulls like Kellogg, near-term sell-stops can be set below $50. GIS is also an option; entry near $60 should the stock fall to that level.

From the Bear Cave: An option for bears may be Sara Lee (SLE). A rally toward its 100 DMA ($13.70) may be an opportunity for a downside play.

For more ideas in real time throughout the trading day, check out Minyanville's Buzz & Banter.

Quick Check Around the World

Asian trading closed with the Hang Seng +1.94%, Nikkei +2.72$, Sensex +1.36%, Taiwan +0.79% and Shanghai +0.18%.

Glancing towards Europe, we see the CAC -0.69%, DAX -0.15%, FTSE -0.18%

As of 8:40 EST, S&P futures are down -3.20 points to 1356, and Nasdaq futures are lower -8.25 points to 1966.

A Look At Commodities

In commodities, crude oil is higher +0.71 to 135.57. Gold is up +8.50 to 878.80. Silver is higher +0.105 to 16.665, and copper is up +1.85 to 361.25.

The dollar index is lower -0.424 to 73.722.

On the Radar

Empire Manufacturing: -8.7 vs. -2.0 cons.

9:00 Net Foreign Purchases: 80.4 bln prior

Click here for the full trading radar.

Happy Monday! Good Luck!
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No positions in stocks mentioned.

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