- Amazon (NASDAQ:AMZN)
Beyond Meat (NASDAQ:BYND)
Domino’s Pizza (NYSE:DPZ)
Invesco Dynamic Food & Beverage ETF (NYSEARCA:PBJ)
iShares MSCI Global Agriculture Producers ETF (NYSEARCA:VEGI)
iShares Global Consumer Staples ETF (NYSEARCA:KXI)
Food Stocks: Amazon (AMZN)
As a great deal of buying has shifted online, Amazon, the largest U.S. e-commerce retailer, has become even more vital. In recent quarters, the company has been expanding its e-commerce and physical retail operations as well as one-day delivery services for Prime members. Amazon’s food delivery service, AmazonFresh, has also become an all-encompassing grocery hub.
Prior to the pandemic, Amazon had made Seattle the home to Amazon’s first full-size, cashier-less grocery store, Amazon Go Grocery. The store has about 5,000 items, including fresh produce, meats and alcohol. In June 2017, the company also acquired Whole Foods for $14 billion.
Amazon reported Q2 earnings in late July and smashed through Wall Street’s expectations. Revenue increased 40% to $88.9 billion. Net income was $5.2 billion, and earnings per share (EPS) were $10.30. A year ago, the respective numbers were net income of $2.6 billion, and EPS of $5.22.
The AMZN stock price reflects the group’s success in serving consumers both in the U.S. and abroad. Shares started the year at $1,875. Their 52-week range includes a low of $1,626.03 in mid-March and a recent high of $3,495. Both fundamental metrics and price momentum of late have been on Amazon’s side. I’d regard any price dip in Amazon stock, especially toward the $3,250 level, as a buying opportunity for long-term shareholders.
Beyond Meat (BYND)
Beyond Meat prides itself for bringing a plant-based meat alternative to consumers. BYND stock also gets a lot of short-term trading attention. It is currently the only publicly traded “pure play” in plant-based food.
Earlier in August, the California-headquartered company released lukewarm second-quarter earnings. Its revenue topped the average estimate. However, revenues at the company’s food-service business declined close to 60% year-over-year due to restaurant and fast-food closures during the pandemic.
Analysts are wondering if the lockdown may continue to affect the company’s growth story. After all, plant-based foods constitute a tiny fraction of food consumed stateside and globally. Yet investors are hopeful that the company will report stronger metrics in the coming quarters.
Meanwhile, Beyond Meat has been increasing its partnerships with various well-known brands, including Dunkin’ Brands (NASDAQ:DNKN), McDonald’s, Starbucks (NASDAQ:SBUX) and Yum! Brands (NYSE:YUM), names that InvestorPlace readers would be well familiar with.
These companies have an impressive distribution reach that will likely support the BYND stock price in the future.
In June, shares went over $160 reach to new highs for 2020. Year-to-date, BYND stock is up about 80%. Beyond Meat is a young company and there are likely to be hiccups along the way. With this in mind, I see Beyond Meat remaining a hot food stock for the rest of the year.
Food Stocks: Domino’s Pizza (DPZ)
Headquartered in Ann Arbor, Michigan, Domino’s Pizza is the largest pizza company in the world based on global retail sales. It is also among the top food stocks that have benefitted from customer cravings in 2020.
Currently, there are more than 17,100 stores — including more than 10,000 outside the U.S. The chain has about 770 independent franchise owners in the U.S., with more than 94% of Domino’s stores stateside franchise-owned.
On July 16, the group announced second-quarter results. Global retail sales, which were positively impacted by U.S. same-store sales, increased 5.7%. U.S. and international same-store sales increased by 16.1% and 1.3%, respectively, compared with the same period in the previous year.
The businesses generated $119 million in net income through the first half of the year, a roughly 13% increase over 2019. Plus, Domino’s gets more than 65% of its sales in the U.S. digitally. Wall Street regards its digital ordering and delivery infrastructure a top asset.
During the quarter, Domino’s also acquired a non-controlling interest in Dash Brands, a privately held company that is the master franchisee in China.
So far in the year, DPZ stock is up more than 42%. Long-term shareholders are delighted to note the growth since 2009, when shares were around $9. Put another way, $1,000 invested in DPZ then would now be about $47,000. I expect the company to reward long-term shareholders for many years to come.
Invesco Dynamic Food & Beverage ETF (PBJ)
Expense Ratio: 0.65% per year, or $65 on a $10,000 investment
The Invesco Dynamic Food & Beverage ETF tracks the Dynamic Food & Beverage Intellidex Index. PBJ includes currently 30 holdings. The most important sectors (by weighting) are Packaged Food and Meats, Restaurants, Food Retail, Soft Drinks and Agricultural Products, which in total comprise 85% of the fund.
The top ten holdings make up approximately 48% of total net assets. PBJ’s top companies include Chipotle (NYSE:CMG), Kraft Heinz (NASDAQ:KHC), PepsiCo (NASDAQ:PEP), General Mills (NYSE:GIS) and Mondelez (NASDAQ:MDLZ).
Investors will note that the fund concentrates on food retailers and restaurants, while underweighting beverage stocks. The fund’s 52-week range has been between $24.44 and $35.79.
If you want to add some spice to your food portfolio, then you may want to research PBJ further.
Food Stocks: iShares MSCI Global Agriculture Producers ETF (VEGI)
Expense Ratio: 0.39%
The iShares MSCI Global Agriculture Producers ETF seeks to provide investment results that correspond to the performance of the MSCI ACWI Select Agriculture Producers Investable Market Index. This benchmark measures the combined performance of companies primarily engaged in agriculture.
VEGI includes 137 stocks. The top ten holdings make up 52.5% of the fund’s total net assets, which are $25.9 million. Its top five companies are Deere (NYSE:DE), Archer-Daniels-Midland (NYSE:ADM), Nutrien (NYSE:NTR), Corteva (NYSE:CTVA) and Japan-based Kubota.
The 52-week range for the ETF has been $18.38-$29.11. Its current price and dividend yield are $28.73 and 2.67%, respectively. Agriculture and food are extremely important parts of our economy. According to the U.S. Department of Agriculture, agriculture, food and related industries contribute over 5% to the country’s gross domestic product.
There will likely be a lot of growth opportunities in the agriculture space. And the stocks in the sector — as well as VEGI — may see new highs in the coming quarters.
iShares Global Consumer Staples ETF (KXI)
Expense Ratio: 0.46% per year
The iShares Global Consumer Staples ETF allocates nearly 53% of its weight to U.S. consumer staples funds. Businesses based in ten other countries, including the United Kingdom, Switzerland and Japan, are also part of the fund.
KXI, which has 92 holdings, follows the S&P Global 1200 Consumer Staples Sector Capped Index. Broadly, it gives consumers access to essential products like food and household goods.
The fund’s top five companies are Nestle (OTCMKTS:NSRGY), Procter & Gamble (NYSE:PG), Walmart (NYSE:WMT), PepsiCo and Coca-Cola (NYSE:KO). Other non-U.S. companies InvestorPlace readers would be familiar with include U.K.-based drinks manufacturer Diageo (NYSE:DEO), French cosmetics and fashion company L’Oreal (OTCMKTS:LRLCY) and Dutch household goods producer Unilever (NYSE:UL).
Overall, I find the global consumer staples sector to be well suited for investing in the days of the novel coronavirus.
Food Stocks: McDonald’s (MCD)
McDonald’s, which has one of the strongest brands globally, operates more than 38,000 restaurants in over 100 countries. Its largest segment is the U.S.
About 90% of the restaurants are currently franchised. As these franchisees carry the operating costs and business risks, McDonald’s does not have to worry about the expenses of running those operations. Even more importantly, it collects rent from the franchisees. It leases those out to the franchisees, often at significant markups. It may not be wrong to say that McDonald’s is in the real estate business as much as food service.
As a result of the pandemic, McDonald’s has started providing pickup, curbside and even delivery options for diners. Will this work long term? Hopefully. So far in the year, MCD shares are up about 8%.
The rest of the year may bring more uncertainties for consumers. But recent research by Sandip Dutta and Vignesh Prabhu of Clemson University highlights that a “franchised company like MCD shows … resilience and holds the stock price steady even in the average market meltdown.”
Therefore, long-term investors may regard the dips in McDonald’s shares as opportunities to buy a hot food stock on sale.
On the date of publication, Tezcan Gecgil did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education, including a Ph.D. degree, in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. She also publishes educational articles on long-term investing.