Recently, I made a few significant changes to my portfolio. I sold shares of Clorox and Hormel, but I also bought more of General Mills. Honestly, all three are still my favorites right now.
Managing a portfolio comes with its challenges, and there are times when difficult strategic choices are necessary, especially when it involves your favorite stocks.
As the end of 2025 approached, I decided to sell my shares of Hormel and Clorox while increasing my investment in General Mills. I think each of these companies has solid potential, which is why they’re still top of mind for me.
Tax Implications
At the very beginning of 2025, I sold some shares in a real estate investment trust (REIT) that I had gained in my taxable account. I opted to use the earnings to fund my Roth retirement account and then repurchased shares in the same REIT. This approach is beneficial because REIT dividends are taxed as income in a taxable account, but in a Roth, they can be tax-free. It’s a smart move to help reduce my taxes now and in the future.
However, selling this way did mean I incurred a capital gain. To counterbalance this, I collected losses from my Hormel and Clorox stocks. It’s a strategic way to avoid capital gains taxes on the REIT. But there’s a catch: I can’t buy back either stock for at least 30 days, or I’d violate the wash sale rule and lose the tax benefits from those losses.
To keep some exposure to consumer staples, I decided to purchase more General Mills stock. I still see profit potential there, even though the dividend yield has returned to where it was when I acquired the stock back in mid-2018. Clearly, I’m a fan of General Mills, and I plan to repurchase Hormel and Clorox in early 2026, once the wash sale issue no longer applies.
Top Three Brands
One major reason I’m attracted to these three consumer staple companies is that they typically offer high dividend yields. While stock returns can be quite volatile, dividends tend to be more stable over time. So, using dividend yield as a gauge of valuation feels reasonable. Hormel stands out as a dividend champion, Clorox is approaching its 50th consecutive year of dividends, and General Mills often increases its dividends, though not always consistently.
In simpler terms, these stocks are reliable, and Wall Street hasn’t priced them according to their historically high yields. Each company’s price-to-sales ratio remains below the average of the last five years, and I generally prefer this ratio over price-to-earnings because sales are less erratic than earnings over time. Interestingly, Hormel is the only one whose P/E ratio is above its five-year average.
That said, all three companies are grappling with industry-wide challenges, as well as unique risks. Still, they are fundamentally sound, especially given their remarkable dividend histories. Presently, Wall Street seems preoccupied with short-term consumer trends, particularly shifts toward budget-friendly and healthier food options.
It’s common in the consumer staples sector for preferences to fluctuate, making consumers more sensitive to prices. General Mills, Clorox, and Hormel are adapting by focusing on innovation, cost control, and acquisitions. This kind of response is standard in the industry.
Investment Outlook
Right now, I believe the consumer staples sector isn’t getting the attention it deserves on Wall Street because investors are too focused on the short term. Personally, I like to think in terms of a long game, which I refer to as time arbitrage (I might have borrowed that phrase but can’t recall from whom). Having worked with General Mills, I want to leverage the market’s current negative sentiments toward Clorox and Hormel for tax benefits. My hunch is that these unfavorable views are unlikely to change in a month, leaving me ample time to reinvest in 2026. All in all, I genuinely appreciate all three stocks, despite having sold off two of them and added to just one.
