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Ralcorp Spin-Off Could Post Big Gains

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February 09, 2012 – Comments (0) | RELATED TICKERS: RAH.DL , POST

 

Besides the great pun in the title, "POST" big gains get it HAHAHA, this is an interesting article about Ralcorp's recent spin off of its branded cereal division, Post.  Many people have said that the move doesn't make sense, but the author of this piece makes a fairly convincing bullish case for investing in POST. 

While I do not personally plan on investing real money in this situation, I do find it intriguing.  It is more than just a run of the mill spin-off, it's a turnaround of a division that was allowed to languish:

However, Post has identified the source of its problems, and has a turnaround plan in place. Until 2008, Post was actually a part of Kraft (KFT), and utilized Kraft's in-house sales force as well as a proprietary tool for managing trade spending. Under Ralcorp, Post lost the use of these resources, and results suffered. Post also increased prices faster than competitors while reducing spending on advertising, leading to decreased perceptions of product value by consumers. Going forward, Post plans to upgrade sales coverage for its largest accounts, implement the use of new analytical products to increase ROI on trade spending, and implement a new pricing strategy that will provide an improved value proposition for consumers. Certainly, if you decide to invest in Post, it is not because the current numbers are extremely attractive, but rather because you expect the company to be able to execute on its turnaround plan.

Ralcorp Spin-Off Could Post Big Gains

Have a fantastic day everyone! 

Deej

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