Summary

• Insider trading activity should tell investors that something is really wrong at Kellogg.

• Cereal consumption in North America is declining and Kellogg will continue to see stagnant and even negative earnings growth.

• Currency headwinds will continue to eat away at the company’s earnings, and an interest rate hike at the Federal Reserve will likely further strengthen the dollar.

• Debt obligations are intensifying, which threatens short-term liquidity.

• Kellogg is overvalued and is long overdue for a stock plunge.

Kellogg (NYSE:K) could be on the brink of a stock plunge.

Kellogg’s insiders are selling shares at an unprecedented level. The past 6 months, insiders at the company have sold over 60% of their total shares, and institutional holders have unloaded over 138 million shares, which at current prices represent nearly 40% of Kellogg’s market capitalization. However, investors should not be surprised by this sell-off. Kellogg is in a difficult financial position and is highly overvalued for its slow growth – a stock plunge could be long overdue.

Growth Issues in the US

Kellogg faces a revenue growth dilemma in the United States. Consumers are increasingly worried about their health, and as a result, they have begun focusing on eating healthy foods, especially at breakfast time. This has resulted in consumers trying to avoid high carb foods, and as a result, they are moving away from cereal in the morning, a trend that should be troubling to Kellogg’s investors.