4 Tempting Picks From the Grocery Space for Investors
The coronavirus outbreak highlighted a paradigm shift in consumer buying behavior. People started shopping essential items rather than making discretionary purchases. It comes as no surprise that demand for toilet paper, disinfectants, masks, gloves, packaged water, medicines and related food staples soared. As consumers stocked up grocery and other essentials, companies left no stone unturned to fill the shelves faster. Well this change in consumer behavior is here to stay, as people are preferring to work from home, dining at home and maintaining social distancing.
Evidently, the companies are set to gain from product innovation and prudent pricing strategy. They have been stepping up omni-channel capabilities and adopting ways to enhance delivery and payment systems, in particular, to expand in the booming online grocery space. To this end, companies’ same-day and last-mile delivery services, and buy online and pick-up in store facilities bode well. In fact, the companies’ initiatives to expand delivery options have been a boon amid the pandemic, helping them cater to soaring demand arising from stay at-home trends.
Although lockdowns are being lifted and businesses are resuming, the constant rise in the number of coronavirus cases has fueled fears of a second wave of COVID-19. And with no vaccine discovered yet, there is a lot of uncertainty surrounding the duration and severity of the virus. Amid such concerns, investing in grocery stocks is a tempting option at the moment. Grocery stocks have always been safe bets, and the pandemic just highlighted the fact that how safe these stocks can be during extreme market fluctuations.
All said, here we have shortlisted four stocks on the basis of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B.
4 Prominent Picks
You may invest in Sprouts Farmers Market, Inc. SFM, which has a Zacks Rank #1 and a VGM Score of A. The provider of fresh, natural, and organic food products has a trailing four-quarter positive earnings surprise of 37.2%, on average. It has a long-term earnings growth rate of 9.2%. Moreover, the Zacks Consensus Estimate for its current financial year earnings suggests an improvement of 33.6% from the year-ago period. The stock has displayed a bullish run on the bourses gaining 20.8% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sprouts Farmers’ first-quarter 2020 results benefited from spike in demand during the latter part of the quarter as Americans stockpiled essential items in the wake of coronavirus outbreak. The company’s focus on product innovation, emphasis on e-commerce, expansion of private label assortment and enhancement of technology bode well. It has launched Sprouts.com website and mobile app to help customers experience hassle-free shopping. Moreover, the company has partnered with Instacart to offer same-day delivery to customers. The home delivery business is now available in most of the company’s stores.
We also suggest investing in The Kroger Co. KR, which has a long-term earnings growth rate of 5.5%. This grocery retailer has a trailing four-quarter positive earnings surprise of 4%, on average. The stock has a Zacks Rank #1 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial year earnings suggests growth of 23.6% from the year-ago period. The stock has advanced 10.7% so far in the year.
Driven primarily by coronavirus-led demand, Kroger registered a sharp rise in sales across both brick-&-mortar stores and digital channels during first-quarter fiscal 2020. Understanding the need of the hour, the company offered a no-contact delivery option, low-contact pickup service and ship-to-home orders. It also continued to expand contactless payment solutions like Kroger Pay. The company has been making prudent investments to bolster omni-channel operations, improve supply chain and increase manpower to ensure swift customer service amid such challenging times.
Investors can count on SpartanNash Company SPTN, which distributes and retails grocery products. The company has a trailing four-quarter positive earnings surprise of 17.1%, on average. The stock has a Zacks Rank #1 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial year earnings suggests an improvement of 82.7% from the year-ago period. Notably, the stock has surged 31.5% so far in the year.
The company’s consolidated net sales rose 12.4% during first-quarter 2020, representing the 16th successive quarter of increase. The result surpassed management’s expectations as the company gained from increased sales across all segments from the coronavirus-led demand, and strong growth from existing customers in the Food Distribution segment. Management stated that the company’s sturdy e-commerce platform, data insights and understanding of consumer preferences, and systems and infrastructure positions it well for future success.
Dollar General Corporation DG, which provides packaged food and perishables such as milk, eggs, bread, refrigerated and frozen food, is also worth betting on. It has a Zacks Rank #2 and a VGM Score of A. The company has a trailing four-quarter positive earnings surprise of 16.9%, on average. It has a long-term earnings growth rate of 12.4%. Moreover, the Zacks Consensus Estimate for its current financial year earnings indicates an improvement of 31.4% from the year-ago period. The stock has appreciated 23.2% year to date.
Change in consumer behavior due to the coronavirus pandemic had a favorable impact on the company’s first-quarter fiscal 2020 performance. The company has been expanding cooler facilities to enhance the sale of perishable items and rolling out DG digital coupon program and DG Go app. Management introduced two transformational strategic initiatives — DG Fresh, designed to enable self-distribution of fresh and frozen products, and Fast Track, an in-store labor productivity and customer convenience initiative. By the end of fiscal 2020, the company plans to operate up to ten DG Fresh distribution facilities, which will serve roughly 12,000 stores.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
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