Equity Research and Investment Analysis

We continue to rate GIS as Undervalued despite the stock hitting new highs for the year. According to our methodology, this stock should continue higher possibly into the $80's before too long. General Mills continues to execute well and clearly this stock is headed in the right direction.

From a valuation perspective, we are in complete agreement with Cramer that WellPoint is certainly attractive as the fundamentals have continued to improve for this huge insurer. There are simply too many questions that are unanswerable for us to subscribe to the theory that WellPoint is part of a defensive strategy. Simply because a stock is attractively valued does not mean that it is not speculative as well.

We have seen the market take on a more speculative behavior than normal in the hopes of greater returns on some of the riskiest issues, which has contributed to the market's impressive rally. However, Cramer is watching a shift in the investor psychology to a more subdued outlook, and he is adjusting his bullishness accordingly. There is no way to really measure a thing like investor psychology, so it really comes from a feeling you have to gauge from watching the way the market reacts to news.

General Mills (GIS) impressed the Street this morning with the home run of earnings reports, the beat and raise. Shares are surging more than 5 percent, as the packaged food giant was able to raise net income by 51 percent. EPS came in at $1.28 which beat consensus estimates by about $.25. The increased earnings were due not to huge sales gains, but rather improved margins from decreased commodity costs and other cost cutting measures.

Cramer believes that this is a major signal that the market is turning to more defensive stocks in anticipation of a possible downtrend. Could this be a sign of a reversal from the huge rally over the last ten weeks?

No one can tell you where the economy is heading but if you are among those that believes that it will continue to deteriorate, then we suggest looking to companies that make inferior goods, like Spam. Hormel is producing the canned meat seven days a week in order to meet increased demand for the cheap alternative. Campbell Soup is having much the same growth in its condensed soups products.

General Mills has been a standout performer in this bear market, and although we have it rated as Fairly Valued, we still think that there it may make a good addition to your portfolio. The company is positioned to take advantage of market weakness and recent results have been very strong.