General Mills (NYSE:GIS): Several of the company’s brands have a long shelf life, enabling bulk purchases.
Costco (NASDAQ:COST): Thought not exclusively a food play, the warehouse chain’s customers are relatively affluent.
Conagra Brands (NYSE:CAG): A consumer packaged goods firm, Conagra should benefit from demand of necessity.
Mondelez International (NASDAQ:MDLZ): A leading snacks manufacturer, everyone could use a little treat now and then.
Kellogg Company (NYSE:K): The blue-chip food company has the resources to succeed with plant-based meat.
Tyson Foods (NYSE:TSN): One of the biggest food stocks in real proteins, Tyson remains relevant despite meatless push.
J. M. Smucker (NYSE:SJM): Offering a combo of breakfast favorites and pet food, SJM covers a wide area.
Just as the U.S. and the rest of the world was coming to terms with the coronavirus pandemic, massive inflation greatly impeded consumer sentiment. If that wasn’t enough, Russia’s dangerous decision to attack neighboring Ukraine completely disrupted the modern global order, skyrocketing prices across the board. Still, if there’s one solid mechanism for an investor to mitigate this crisis upon a crisis, it’s through food stocks.
It’s a terribly cynical idea but in times of turmoil and shortages, cynical investments can often be the most profitable. What’s so great about food stocks to buy? Simply, it’s the one sector that people cannot afford to skimp out on. Sure, the miracle of the human body means that it’s theoretically possible for someone to go without food for up to two months.
I wouldn’t try it though. Weakness will set in, preventing you from properly functioning. And starvation as you might imagine has over time a 0% survivability rate.
Therefore, consumers will dump all the discretionary spending categories — the nice clothes, the nights out on town, maybe even cut their streaming subscriptions down to one or two — before they even think about cutting the essentials.
So, when in doubt, go with food stocks, particularly these seven, the majority of which are among the 31 stocks that make up the Invesco Dynamic Food & Beverage ETF (NYSEARCA:PBJ). That exchange-traded fund is up 2.28% year-t0-date.
J. M. Smucker Company
Food Stocks to Buy: General Mills (GIS)
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Stocks like General Mills don’t have a “sell-by” date. That came to mind during my February interview with CGTN America. I mentioned then the pernicious nature of inflation, which is that under a backdrop of constantly rising prices, whoever spends the money first wins and whoever saves the money loses.
Under normal circumstances, it really should be the other way around, which is why inflation is problematic in more ways than one.
However, such topsy-turvy thinking means that shrewd consumers can beat rising costs — or at least mitigate their pain — through bulk purchases. Well, for food stocks tied to perishable goods, such behaviors might not pan out favorably. However, General Mills doesn’t really have that problem. Largely specializing in packaged products, GIS brands typically have a very long shelf life.
But will inflation really change societal attitudes toward food stocks? According to the evidence, yes. Earlier this year, a survey revealed that a whopping 80% of consumers expect to change their shopping habits if rising costs persist.
They’re persisting, making GIS stock one of the most intriguing food stocks to buy. The share price is up 1.58% YTD.
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Although Costco isn’t an exclusive play among food stocks, it’s one of the most important at this juncture. As you know, inflation disproportionately hurts lower-income households because these folks must spend a higher portion of their earnings toward necessary goods and services that have spiked upward.
In contrast, it’s possible that higher-income households could benefit from inflation. How could high wage earners gain from rising costs, though? While rising costs hurt everyone, wealthier individuals could redirect disposable income toward investments that can grow with the surging costs. Thus, the appreciation of their investments could mean that some folks come out ahead.
Using this logic, those seeking shelter in food stocks should take a look at Costco. Per a Business Insider article, the “average Costco customer is a 39-year-old Asian American woman who’s married and earns $125,000.” If you really want to read between the lines, the gender pay gap suggests that Costco shopping households may earn considerably more.
COST stock is up 1.7% YTD as compared to a 1.46% gain in the Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP). Costco is the second-largest holding (10.83%) in that exchange-traded fund’s 33-stock portfolio.
Bottom line: when inflation strikes, stick with the rich.
Food Stocks to Buy: Conagra Brands (CAG)
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While food stocks during inflationary cycles feature a cynical air about them, Conagra Brands might particularly benefit from said cynicism. As a consumer-packaged goods firm, Conagra touches virtually every aspect of the food retail industry, from supermarkets, restaurants and service establishments.
For starters, the company will likely see its revenues increase from its grocery arm. As we saw during the worst of the Covid-19 crisis, severe supply chain disruptions translated into hoarding behavior among many individuals. We’re still suffering from supply chain-related challenges so more money may be spent on desirable items. Plus, people will find preparing their own food much cheaper than eating out.
But even the restaurant business might see some demand increases, which leads to my second point. At first, consumers may consolidate their discretionary purchases to areas that can stack value. For example, it’s better to spend $100 at a restaurant than it is at a nightclub. With the former, you can at least enjoy some leftovers.
CAG stock is down 4.49% so far in 2022.
During times of economic challenges, analysts will often cite Coca-Cola (NYSE:KO) as a recession-resistant investment. The reason? Beyond providing a dividend and commanding healthy cash levels, Coca-Cola provides a cheap respite from the daily grind. While it’s obviously not the healthiest beverage, a can of the iconic sugary cola provides an immediate pick-me-up.
By the same logic, Mondelez is one of the more intriguing food stocks to buy. A leading snacks manufacturer, Mondelez’s brands reach more than 150 countries, delighting consumers the world over. Some of the company’s most popular products include Chips Ahoy, Oreo, Ritz and Triscuit. As well, Mondelez owns the Cadbury brand of chocolate candies, very appropriate for the upcoming Easter holiday.
If there’s another reason to consider MDLZ, it’s that chocolate may have a perceived benefit toward stress reduction. Given that inflation causes stress for everyone, this security is one of the most effective (though again cynical) food stocks available.
MDLZ stock is down 3.63% YTD versus the 1.46% rise by ETF XLP. Mondelez is the eighth-largest holding (4.37%) in consumer staples equities portfolio.
Food Stocks to Buy: Kellogg Company (K)
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As with General Mills earlier, Kellogg’s is an iconic company that specializes in many popular consumer packaged goods. Since inflation expectation data suggests that regular folks largely anticipate prices to continue moving higher, Kellogg’s could enjoy bulk demand.
After all, if prices are going to keep rising, there’s really no point in saving the dollars that you’re going to spend anyways on necessary goods and services. Therefore, many of Kellogg’s brands could see a demand spike from this pivot in sentiment.
But there’s also another reason to consider K stock among your top food stock and that’s the underlying company’s investments in plant-based meats. Surveys suggest that young consumers are likely to be repeat purchasers of plant-based foods..
However, fake meat-only companies have suffered sizable losses probably because of the inability to scale the business. But Kellogg’s has the resources to support its initiatives like Incogmeato. Over time, plant-based meats could be a massive winner, driving up K stock.
Tyson Foods (TSN)
Although enthusiasm for the burgeoning fake-meat industry makes a compelling case for certain food stocks like Tyson Foods, it’s difficult to know for sure how the demand trajectory will play out. Primarily, the plant-based protein revolution didn’t start a few years ago as the mainstream marketing machinery might suggest. As a New York Times article mentioned, the current movement has roots in the 1970s.
But this begs the obvious question: if plant-based alternatives were around in some form during the 70s, how come sustainable food stocks (or at least the idea of food sustainability) didn’t become popular until recently?
Perhaps the taste of alternative food products just weren’t appetizing as they are today. Still, it does raise the concern that people will prefer the real deal, which brings us to Tyson.
A leading producer of animal-based proteins, Tyson probably won’t earn ESG awards anytime soon. However, it will fill critical demand. In addition, a full-scale pivot toward plant-based meats won’t happen overnight, if it happens at all. Therefore, TSN stock still commands relevance, for better or for worse.
Food Stocks to Buy: J.M. Smucker (SJM)
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Last but definitely not least, we have J.M. Smucker (NYSE:SJM). Well known for its breakfast favorites, Smucker’s is really a multi-pronged weapon among food stocks.
First, breakfast being the most important meal of the day, SJM owns several desirable brands. In addition to its namesake products, the company also owns recognizable offerings such as Jif, Knott’s Berry Farm and Laura Scudder’s. As well, it specializes in coffee products, such as Folgers, Dunkin and Cafe Bustelo, which coffee blog Art of Barista describes as “one of those rare coffee brands that have sustained consumer interest.”
But the real kicker for SJM is its pet food and snacks division. As you know, Americans love their pets, often treating them like human family members. Unfortunately, even Fido is hurting from inflation and global supply chain disruptions, resulting in widespread shortages of pet food.
Unless circumstances become dishearteningly desperate, it’s likely that pet parents will simply pay up. Yeah, maybe that’s the most cynical thought but it might serve SJM stock exceptionally well.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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