The Sweet, the Bad and the Buyout
and a idea
The Sweet
In recent news Ferrero, the Italian company known for Nutella and Kinder, is buying WK Kellogg the maker of Corn Flakes, Froot Loops, and Rice Krispies for $3.1 billion. This deal helps Ferrero grow in the U.S. and move beyond just candy into breakfast cereals. WK Kellogg has been struggling with flat sales, $500 million in debt, and more people choosing cheaper store brands. Health concerns and rising prices have also made sugary cereals less popular. Kellogg split its cereal business from its snacks division in 2023, and that snacks side was later sold to Mars for $36 billion. Ferrero’s CEO says this deal will help the company offer more food choices, and Kellogg’s CEO says being owned by a private company like Ferrero is better for long term growth. W.K. Kellogg, who started the cereal brand over 100 years ago, helped make it a household name. Now, Ferrero plans to invest in the cereals and update them, though they’ll also have to deal with new rules like removing artificial colors from school cereals by 2026.
In general I find the confectionery business to be an interesting one. Buffett famously bought See's Candies but despite their efforts they could never make it a country wide brand. This is what I find interesting, chocolate is chocolate right ? Well not exactly. Worldwide and nationwide people are exposed to different chocolates and taste profiles when they are young and when they get older they form a taste preference to suit that type of chocolate. For instance, Hershey's is popular in America however Hershey's is not popular in the UK. In the UK Cadburys are popular, Cadbury is not popular in America. Which does make sense, if you have a brand of chocolate that's been a national favorite for over a 100 years that would be hard to replace. Below are some countries and their preferred chocolate brands with years of incorporated. One brand that has broken down this barrier is Coca Cola, no matter where you go America, China, Australia they love Coca Cola
Im based in New Zealand and if I had enough money I would buy our most popular chocolate brand which is Whittakers. I wouldn't buy it because I expect the cash to grow at 20% per year or anything but because there's a high chance 50 years from now kiwis will still enjoy eating Whittakers, even if you just increase the prices of the chocolate slightly above inflation you would do very well.
The Bad
I recently read a WSJ article, and here’s the gist of it.
In America over the past 20 years, about 2.1 million people each year bought their first home. But in 2024, that number dropped to just 1.1 million. The reason? Buying a home has become too expensive. Mortgage rates have gone up sharply since 2022, and home prices are still high. Today, a buyer would need to earn around $127,000 a year to afford the payments on a typical home. Just a few years ago, in 2021, that number was only $79,000. Most renters simply don’t make that kind of money.
How horrible is that. I just want to get it established that I am not a communist or socialist however isn't it awful that an average couple can't even afford an average house?
The Buyout
Above is a post from earlier this year. In this post i wrote the following.
DallasNews Corporation (DALN) expect to close the sale of its property soon and when that happens shareholders are expected to get a special dividend of $3 – $5 in the next few months. Since the stock is currently sitting at $6.59 a $3 special dividend would be 45.5% of its current price. However, this is assuming the sale closes.
Yesterday news came out stating that $DALN will be bought out for $14 a share. Over double what the original price was when I pitched it. It's amazing what you’ll see in the markets if you buy and hold.
A Idea Short Pitch
Company Name: Supreme PLC
Marketcap in £: 207 mn
P/E (NTM): 9.9x
EV/EBIT (NTM): 7.3x
ROIC LTM: +24.4%
Revenue 5-year CAGR: +20.1%
Supreme PLC, is a UK based company selling batteries, vaping products, lighting, sports nutrition, soft drinks, and tea. It uses a vertically integrated model and strategic acquisitions to expand its diverse consumer goods portfolio.
Significant CEO Ownership (51%): The CEO, Sandy Chatha, owns 51% of Supreme PLC, meaning his financial success is closely tied to the company’s performance. This high ownership aligns his incentives with shareholders, encouraging decisions that drive long term growth.
Proven Acquisition Success (3-4 Year Payback): Supreme has a strong track record of acquiring businesses and integrating them effectively, typically recovering the investment within 3 to 4 years. Recent acquisitions like Clearly Drinks and Typhoo Tea have boosted revenue and diversified its portfolio.
Simple Growth Strategy: Supreme’s formula is straightforward: acquire complementary businesses, improve operations, and reinvest profits to fuel further growth. This compounding approach could lead to significant value over time.
The heart of this investment thesis is simple. You've got a company run by a sharp, disciplined operator who’s got skin in the game. His own wealth is tied up in the stock, so he’s not just playing with other people’s money. Incentives matter, and his are aligned to create real shareholder value, not to chase vanity metrics or empire build for the sake of ego. As the business scales, it’s basic compounding a bigger footprint means more deal flow for acquisitions. The flywheel spins faster.Keep in mind this CEO isn’t some trigger happy deal junkie. He’s got a proven track record, picking winners that pay back in three to four years. That’s not luck, that's a man who knows his circle of competence and sticks to it. He’s not afraid to say “no” when the numbers don’t add up.
Disclaimer: The information provided in this article is for educational and informational purposes only. It does not constitute financial advice, investment recommendations, or an offer to buy or sell any securities. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions. The author may hold positions in the companies mentioned, but the opinions expressed are their own and are subject to change without notice. Investing involves risk, and past performance is not indicative of future results.