The outbreak of the novel coronavirus pandemic has created some major shifts in top food stocks.
Restaurant dining lost its allure and home cooking became the next best alternative. This led to a spike in demand at grocery stores and restaurants took takeout services to the next level. Experts believe these new dining trends will be here to stay long after the pandemic.
As economies reopen with caution, many restaurants have learned to embrace outdoor dining in lieu of social distancing. This hints at a more bullish trend toward food stocks in the coming months.
Given that there is a lot of flux in the industry at the moment, it is important to pick the stocks that add the most value to your portfolio. Here are the top stocks to invest in this year:
Food Stocks: Beyond Meat (BYND)
Alternative meats producer Beyond Meat has been making waves in the food industry since its IPO debut in 2019. Since then the stock rallied by an impressive 141% with room for more upside potential. Despite the adverse effects of the pandemic this year, Beyond Meat experienced double-digit revenue growth in the second quarter of 2020. In its upcoming earnings call, Yahoo Finance estimates its revenue will be up 47.4% from a year ago.
In addition to an impressive bottom line, Beyond Meat has partnerships with brands such as Dunkin’ (NASDAQ:DNKN), Starbucks and McDonald’s (NYSE:MCD). Although sales at these chains slowed down in the pandemic, they are likely to pick up once again. Moreover, Beyond Meat saw sales spike earlier this year due to a meat shortage. With meat plants unable to produce at capacity, consumers looked towards the next best “alternative.”
As the future of restaurants remains in flux, packaged foods like those offered by Beyond Meat have experienced an increase in sales. This trend is likely to continue as the second wave sweeps its way across the nation. Beyond Meat is a top food stock and a great investment in these uncertain times.
Chipotle Mexican Grill (CMG)
Chipotle reported earnings earlier this week and it looks like people craved Mexican food despite a pandemic summer. The restaurant chain saw sales bounce back from lows in March. Total revenue for the quarter amounted to $1.6 billion which was up from $1.4 billion a year ago. This spike was attributable to the 8.3% increase in same-store sales although earnings per share dipped to $3.76 from $3.82.
Chipotle successfully caters to two trends that play perfectly into the pandemic environment. First, the company uses digital orders to its advantage. With forced store closures this year, digital sales accounted for 48.8% of total revenue in Q3. Many customers also signed up for the loyalty program.
Second, in an era where getting active outside or at a gym has become a challenge, people have to find ways to stay fit from home. Chipotle markets its bowls and burritos as fresh and healthy, making them a fan favorite this year. The company also places a lot of emphasis on menu innovation, which has contributed to steady sales growth.
Chipotle is a top food stock that’s worth keeping in any investing environment. With a loyal customer base and a menu that never goes out of style, the restaurant shows a powerful uptrend.
Since its early days, Starbucks has remained a strong growth stock, generating some juicy returns for investors. However the pandemic put a wrench in its upward trend with forced store closures. The company saw sales plummet by 41% in the U.S. and 37% worldwide. Total net earnings also fell by 38%.
Despite this turn, Starbucks made the best of a bad situation by leveraging its digital footprint. The company reignited its path to recovery with contactless delivery. Customers can order through the Starbucks app and either do drive-through or in-store pickup. These services are expected to soften the blow of the pandemic in its upcoming earnings.
In addition, the coffee company also changed its loyalty program to make it easier to earn rewards. Maintaining a loyal base is one of the key growth drivers for the company. After the rollout of the new rewards program, The Motley Fool reports that the number of active customers increased to 18.7 million from 16.3 million in August.
A strong focus on digital sales and an effort to expand its customer base with rewards can help Starbucks navigate this uncertain time. As sales pick up, the company will experience pre-pandemic growth levels once again. This top food stock is worth your investment until then. Stay tuned for earnings on Oct. 29.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.