Fiscal year 2020 has been one of the most challenging years in decades. The festive season is unlikely to be the same as other years as the novel coronavirus pandemic rages.
However, spending quality time with the immediate family, in-house entertainment and some healthy food can be a comprehensive package for Thanksgiving.
Talking about healthy food, the pandemic has increased the popularity of organic food. This change is likely to stick.
Therefore, I wanted to talk about three food stocks to buy that are in the business of providing healthy eating options to consumers. I believe that these stocks can also energize the portfolio.
Let’s discuss the following food stocks to buy before you sit down at the Thanksgiving table:
3 Food Stocks to Buy for the Thanksgiving Table: Chipotle Mexican Grill (CMG)
I would rate Chipotle Mexican Grill stock among the top stocks to buy. The shares have doubled since the March pandemic lows while the Invesco Dynamic Leisure and Entertainment ETF (NYSEArca:PEJ), which holds CMG stock in the number six spot of 32 in its portfolio, is up 33% in the same period.
Chipotle has a nutrition calculator for its menu and has been focused on “preparing real food made with real ingredients.” In July, the company teamed up with Tractor Beverage to serve its “non-GMO and certified organic lemonades, aguas frescas and tea” at Chipotle restaurants.
From the perspective of keeping the portfolio healthy in the face of the pandemic, Chipotle reported strong numbers for the third quarter of 2020. The company’s revenue increased by 14.1% to $1.6 billion.
A key highlight was a 202.5% growth in digital sales, which accounted for 48.8% of total sales during the quarter. Further, the company opened 44 new restaurants. With positive news on the vaccine front, the coming year is likely to be better in terms of in-restaurant sales.
Overall, the company is fundamentally strong. The pandemic will result in a shift in eating preferences. Consumers will look for healthier eat-out/take-in options and CMG stock is likely to benefit from this trend.
Lifeway Foods (LWAY)
Lifeway Foods has been another money spinner in pandemic America. LWAY stock has surged by 277% since mid March. I do expect some profit booking — such as yesterday’s 7.8% decline — but the stock is worth keeping in the radar.
As an overview, the company is a supplier of the probiotic, fermented beverage known as kefir. The beverage comes in categories of low fat, real fruit and non-fat. In addition, the company also supplies specialty cheeses, probiotic supplements and a ProBugs line for kids.
It’s important to note that the company’s products are a good source of calcium, vitamin D and protein. The pandemic has triggered demand for potential immunity-building products. The impact is likely to sustain even after the pandemic, which is good news for Lifeway Foods.
The company’s focus on digital engagements is likely to deliver results in terms of top-line growth. For Q3 2020, the company reported revenue growth of 14.6% on a year-on-year basis. I believe that growth is likely to accelerate as product visibility increases in the coming quarters.
Overall, I would not recommend a big plunge in this micro-cap stock ($104 million). However, if growth gains traction, returns could be multi-fold.
SunOpta is another name that has moved sharply — up nearly five-fold — since March. Still, I believe that STKL stock is worth considering on corrections. While broad market valuations look stretched and buyers should be cautious, STKL stock is a potential value creator.
The company operates in three business segments — plant-based food and beverage, fruit-based food and beverage, and organic ingredient sourcing.
The plant-based food market is positioned for strong growth in the coming years. The category is the second-most discussed diet among American eaters today, right after veganism, according to food researcher Tastewise. However, the category is seeing much higher growth than its vegan counterpart.
SunOpta does not direct cater to consumers. However, the company’s customers include the likes of Starbucks (NASDAQ:SBUX) and Kellogg Company (NYSE:K), among others. As consumers prefer relatively healthy eating options, the demand for the company’s products is likely to grow.
For Q3 2020, the company reported EBITDA growth of 130% on a year-on-year basis. If this growth sustains, I expect STKL stock to trend higher. Considering the growth plans, I am bullish.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.