A revolution is brewing in the grocery aisles and it’s not out of anger from rising prices.
Sales of organic, health-centric food and beverage products have been making steady gains over the years, lifting not only the artisanal stocks that provide them, but also consumer expectations. According to industry surveys, an increasing number of grocery shoppers are becoming more discerning with their purchases.
That is leading to fiercer competition amongst food stocks.
Once the niche stronghold of artisanal stocks, the organic food craze has gone mainstream, with studies showing that 81% of American households have purchased organic products at least some of the time. Such statistics have attracted the attention of big-box retailers and other establishments not traditionally associated with premium food products.
The organic food industry continues to break record after record, totaling $39.1 billion in revenue in 2014, an 11.3% lift from the prior year. These are figures traditional food stocks will find impossible to ignore, setting the stage for an exciting and lucrative opportunity.
Here are four artisanal stocks that should offer healthy returns over the next several years.
4 Artisanal Stocks to Buy: Whole Foods Market (WFM)
Because of this, WFM stock dropped 11.4% in market value on the day of the earnings release. Since then, shares have continued to decline further, with WFM down an ugly 29% in only four months.
Investors are also concerned about WFM’s ability to stay above the competition. Popular food stocks and big-box retailers, such as Kroger (KR), Sprouts Farmers Market (SFM) and Walmart (WFM), have expanded their product offerings to include organic and natural foods, the main selling point for which WFM is famous.
O ye of little faith, as one particularly gifted carpenter might say.
Despite the nasty volatility in recent months for WFM stock, it appears to be developing a bullish pennant formation. This interpretation is based on two factors. First, WFM has yet to violate a rising support line anchored in early 2011. Second, the ceiling, or resistance line, is declining, as evidenced by the fact that WFM’s peak price point of 2015 is lower than its peak of the prior year.
Currently, WFM stock is on the valley of the downswing, meaning that should the pennant formation hold, people who initiate bearish positions now are in for some unpleasantness.
Admittedly, WFM is a scary-looking and speculative investment. However, for those that can overlook some of the fundamental noise, the technical argument does suggest a lucrative play.
4 Artisanal Stocks to Buy: Hain Celestial Group (HAIN)
Luckily, its management team isn’t one to rest on its laurels.
Fundamentally, HAIN has strung together an impressive showpiece, meeting or beating Wall Street’s earnings expectations since at least the first quarter of 2012. That’s 15 consecutive hits of outperformance between November of 2011 until now! In its most recent report the fiscal third quarter, HAIN posted earnings per share of 45 cents, which came in line with analysts’ forecasts.
The biggest argument for HAIN is rather straightforward: money talks and something else walks. Its fundamental strengths align perfectly with its performance in the markets, and for HAIN stock, there’s no need to fight the trend unless it breaks out of its upwardly rising channel.
Only if HAIN is in danger of breaching the $52 level should investors consider pulling out. Otherwise, it’s like the Dow Jones Industrial Average: many people hate it, but the long-in-the-tooth prognostication of utter market collapse has yet to materialize.
In the crazy financial world where “good is bad and bad is good,” HAIN is simply what its advertised to be: a solid company within the food stocks sector.
4 Artisanal Stocks to Buy: Craft Brewers Alliance (BREW)
Despite craft beers being a hot commodity within the food stocks industry, BREW’s performance in the markets has been disappointing in recent sessions. For the first quarter, BREW reported a decline in net sales year-over-year, which did not please investors. After the earnings release, BREW gapped down severely at the opening bell and continued sliding until it finished the session 19% in the hole.
Interestingly, BREW stock has a tendency to consolidate gains made off a previous rally, only to later surge forward again. For example, between January and July of 2010, BREW leapt over 100% in market value. Shares continued to skyrocket until the spring of 2011, when BREW hit the consolidation phase of a pennant formation before breaking out of it two years later. A similar occurrence is in development right now, which leads to the potential of yet another breakout move.
On paper, BREW is a tough stock to recommend. However, if market history repeats itself, we could be on the verge of a very lucrative opportunity.
4 Artisanal Stocks to Buy: Boston Beer Co. (SAM)
Despite the prestigious accolades, SAM has captured only 1% of the beer market, according to Boston Beer chief executive officer, Jim Koch. This runs counter to the idea some people on Wall Street have forwarded, suggesting that craft beer is in a bubble.
Koch further points towards discerning millennials and the increasing demand for quality offerings from food stocks as evidence that there is substantially more room for growth.
This is also good news for potential investors of SAM stock. As is the case with BREW, shares of Boston Beer are consolidating the gains made earlier this year. A similar pattern emerged between the summer of 2013 and the fall of 2014, when a long-term pennant formation consolidated the windfall of a massive rally, which later culminated in a record-breaking move for SAM stock. This then raises the possibility of a repeat maneuver in the markets.
With the combination of household recognition and consistently strong technical performance, look for SAM stock to continue making headlines for all the right reasons.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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