U.S. markets open in 2 hours 9 minutes
  • S&P Futures

    4,203.75
    +9.50 (+0.23%)
     
  • Dow Futures

    34,534.00
    +92.00 (+0.27%)
     
  • Nasdaq Futures

    13,632.75
    +35.00 (+0.26%)
     
  • Russell 2000 Futures

    2,251.00
    +11.10 (+0.50%)
     
  • Crude Oil

    64.74
    +0.03 (+0.05%)
     
  • Gold

    1,819.50
    +3.80 (+0.21%)
     
  • Silver

    27.40
    -0.08 (-0.28%)
     
  • EUR/USD

    1.2076
    +0.0007 (+0.06%)
     
  • 10-Yr Bond

    1.5610
    0.0000 (0.00%)
     
  • Vix

    18.26
    -0.89 (-4.65%)
     
  • GBP/USD

    1.3908
    +0.0016 (+0.11%)
     
  • USD/JPY

    109.1620
    +0.0770 (+0.07%)
     
  • BTC-USD

    56,323.29
    -1,521.20 (-2.63%)
     
  • CMC Crypto 200

    1,467.47
    -3.95 (-0.27%)
     
  • FTSE 100

    7,125.66
    +49.49 (+0.70%)
     
  • Nikkei 225

    29,357.82
    +26.45 (+0.09%)
     
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Don’t count out food stocks just yet — here’s why

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Yahoo Finance’s Brian Sozzi breaks down why packaged foods are booming amid the pandemic and outlook for food stocks.

Video Transcript

JULIE HYMAN: Well, maybe the Brian Sozzi cartoon today should be eating instead of lazing, because you are looking at packaged food. We've talked to a lot of packaged food CEOs over the past many months, Brian. And a lot of them have seen demand that has been really hot, right, people looking for comfort foods during the pandemic. What happens now for these companies?

BRIAN SOZZI: Yeah. We've been eating up these earnings day interviews with packaged food giants, Julie. You are correct. But really, a great story, weekend story, by the folks at Barron's here, cover story over at Barron's, looking at the packaged food industry and sent me back to the drawing board, looking at some of these stocks.

And it's interesting to see the underperformance of big food year-to-date. I mean, I got Conagra, shares up 3.7% year-to-date. The S&P 500 is up 11%. Pepsi shares, PepsiCo shares are down almost 2%. Coca-Cola down almost 1%. The outperformer year-to-date is Kraft Heinz. But that's a company that is trying to turn itself around in real time. So that's why you're seeing its stock up as much as it is. So I would say the purest outperformer year-to-date is Hershey, shares up 6%.

And there is this perpetual fear, and the Barron's story goes into it, amongst the analyst community that demand is going to fall off a cliff later this year. Everybody is going to be going back out to restaurants and maybe purchasing less frozen food. There are no indications that is starting to happen. And even if it does, we're probably going to continue to eat food at home, maybe not at the rate we did last year, but at a very strong clip and probably at a higher clip than we saw in 2019. And you know what? The food is not that bad. A lot of big food has done a really good job of improving their packages.

But I do want to note, you know, I came up with a couple of reasons why these stocks might start to work again, outside of the fact they are cheap right now compared to their historical valuations. Price increases, a lot of big food is raising prices. That should benefit sales and profit margins. Again, point number two, we're still eating a lot at home. We have seen that within Coke, Pepsi, and Conagra earnings over the past two weeks.

And last but not least, innovation. Big food is starting to innovate in a big way. And I look at over folks at Conagra, they just launched cauliflower wings. Big seller for them. Now, coming up, they're launching Keto Duncan Hines brownies and mega stuff pizza. Not too sure what any of that stuff is, but sign me up. It sounds good. I want to try it and I'm willing to pay an extra $2 to try it.

MYLES UDLAND: You know, Sozzi, I wonder, though, if we're not just watching sort of the accelerated version of what is coming for the apparel business. And we've talked a lot about the way that traditional sleepy, kind of left for dead department store types, and OK, all the stores are different with the apparel brands, yadda, yadda, but these stocks have worked as a general idea over the last year. And you've talked, and we've talked on this show a lot, about this clothing stock up, as the world reopens.

Well, the reason that both of these sectors, big food and big clothing, were under pressure pre-pandemic is because there weren't any growth drivers. There was no new secular grower within these businesses. There, in the apparel business, they're kind of doing their slow death. In the food business, they're growing at 1%, 2%. They buy back stock and they pay a nice dividend.

And I sort of wonder if we don't get back to that story in both instances in a couple of years. Because I think you're right. All those foods you're talking about, that's innovation. All that stuff is very interesting. But is it resetting the organic growth trajectory other than mid to low single digits? And I'm not-- I mean, I think the reason the market is sort of shrugging its shoulders at these stocks is because the answer is it's not.

BRIAN SOZZI: Yeah, a lot of these analysts, they'll go back to the historical playbook and they think, well, sales are going to drop off the map. But again, I just think a lot of these food companies have done a very good job innovating and giving people reasons to stay home and eat more food.

And yes, Julie Hyman, you heard that correct. That is cauliflower wings. They are essentially cauliflower wings in a frozen bag by Conagra with Buffalo sauce on it. Yum, yum, yum, I have tried them.

JULIE HYMAN: I-- yeah, I just can't go, with that. OK, we're going to take a break.

MYLES UDLAND: So anything that can have Buffalo on it--

[INTERPOSING VOICES]

MYLES UDLAND: Yeah, anything that Buffalo sauce goes on is now called a wing. I mean, it started with boneless wings, which are just pieces of breast meat with Buffalo sauce on them. So now anything that can be Buffaloed is considered a wing, even if it's cauliflower. I guess-- is that-- that's how we're doing it.

JULIE HYMAN: Yeah--

BRIAN SOZZI: That's correct.

JULIE HYMAN: --cauliflower will never be a wing.