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7 Food Stocks to Store Up On Amid Inflation Concerns


food stocks - 7 Food Stocks to Store Up On Amid Inflation Concerns

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If you depend on the retail market, like most food stocks do, then you either need a strong niche or a powerful collection of brands. These stocks fit that bill.

As inflation continues to rise, the food business gets squeezed. The bigger brands can last longer in this environment because they have more pricing power and volume.

By that I mean they can control their costs of inputs better and they can be more flexible in the price increases they pass on. It’s a fine balance of increasing revenue and reducing their margin shrinkage.

But that’s where the brands come in. Consumers that are brand loyal will eat higher prices — up to a point — to stay within their consumer comfort zone. Walking away from a brand can be a psychological shift that changes consumers’ buying patterns significantly. Good companies can manage this.

The food and drink stocks below are major brands that will do much better during high inflation than smaller competitors with less pricing latitude.

  • Diageo (NYSE:DEO)
  • Keurig Dr Pepper (NASDAQ:KDP)
  • Mondelez (NASDAQ:MDLZ)
  • PepsiCo (NASDAQ:PEP)
  • Hershey (NYSE:HSY)
  • JM Smucker (NYSE:SJM)
  • Tyson Foods (NYSE:TSN)

Food Stocks: Diageo (DEO)

a line up of black label whiskey to represent DEO stock

Source: IgorGolovniov / Shutterstock.com

If you’re someone who enjoys an adult beverage now and again, or buys adult beverages for post-Covid gatherings, it’s likely that you’re a customer of a DEO brand or two.

DEO is the second-largest spirits company in the world and the largest retailer of Scotch whiskies. It has over 200 brands from beer to baijiu. It also owns a large share of luxury retailer LVMH’s (OTCMKTS:LVMUY) Moet Hennessy brands.

Its influence is significant. And while it does have some beer brands under its banner, its real power is in liquor brands. That’s a good thing, because at this point there is a definite trend that is bending toward liquor with younger generations.

Certainly there are new concoctions that beer companies are continually bringing to market to capture the zeitgeist, but the longer-term trend continues to bend toward liquor sales. And DEO is over 180 countries. The trend is its friend.

DEO stock has gained 18% in the past 12 months, and has only been hit by the recent selloff. That’s made it a bit more reasonably priced and well positioned for continued long-term growth. It has a nearly 2% dividend as well.

This stock has an “A” rating in my Portfolio Grader.

Keurig Dr Pepper (KDP)

Keurig Dr Pepper (KDP) sign on the front of a building

Source: Shutterstock

While the original Green Mountain Coffee Roasters brand began 41 years ago in Vermont, it was the in the early 1990s that business really took off. That’s when Keurig was born.

KDP looked to change the way offices made coffee and began introducing its coffee and new single-cup coffee makers into offices. The rest is the story of expanding that brand to retail consumers and then adding new labels to complement its hot beverages.

In 2016, the company was bought by private equity firm JAB and in 2018 Dr. Pepper was acquired. It then changed its name and got a new ticker symbol. Since then, it has expanded its soft drinks line with a number of niche brands, both carbonated and non-carbonated. It’s now the third-largest beverage company in the U.S.

KDP stock has fared very well in this tumultuous market. It has gained 20% in the past 12 months and has gained 7% in the past three months. It also has a nearly 2% dividend.

This stock has an “A” rating in my Portfolio Grader.

Food Stocks: Mondelez (MDLZ)

The Mondelez website magnified by a magnifying glass

Source: Shutterstock

When you’re a snack food and beverage company with a $92 billion market cap, you cover a lot of the shelves in the supermarket. What’s more, MDLZ also has an 11% stake in KDP to further diversify its interests.

Spun off from Kraft Foods in 2012, MDLZ has a host of familiar brands including Cadbury, Oreo, Ritz, Sour Patch, Triscuit, Toblerone and others. These are iconic brands that are well known around the world. In the U.S., they dominate grocery store shelves and, more importantly, consumers’ shopping carts. Many of the brands are unique, so they’re difficult to find substitutes for.

MDLZ stock has been another solid performer, gaining 22% in the past 12 months and more than 7% in the past three months. It also has a 2.1% dividend.

This stock has a “B” rating in my Portfolio Grader.

PepsiCo (PEP)

Logotype of PepsiCo (PEP) against the blue sky

Source: FotograFFF / Shutterstock.com

PEP recently reported earnings and they were good. They beat expectations and revenue was up. The one warning sign was its decreasing margins. That indicates PEP is trying to manage higher prices of inputs while not passing all of them on to customers.

Food stocks are a low-margin business for the most part. And selling in large volumes helps when you have strong brands like PEP does. Remember it doesn’t only have its sodas and non-carbonated beverages, but it also owns Quaker Foods and Frito-Lay. All these brands are in markets around the globe.

Its $238 billion market cap reflects its influence, and this is the kind of stock that can navigate the current market turbulence and come out stronger. It has the cash to buy weakened rivals in strategic markets and also maximize its current product lines.

PEP stock has gained 26% in the past 12 months, and 4% in the past three months. It also has a 2.5% dividend.

This stock has an “A” rating in my Portfolio Grader.

Food Stocks: Hershey (HSY)

The entrance to the Hershey (HSY) factory in downtown Hershey, Pennsylvania.

Source: George Sheldon / Shutterstock.com

When you’re a confectioner with a $41 billion market cap, you’re in pretty rarified air. Most of its competition has been bought out and rolled into other big food stocks — some of which are in this article.

And the thing is, HSY has been focused on this work since 1894. What you should take from that is it’s very good at what it does. And it has been through far worse than the current market volatility.

Managing a business solely focused on one key input isn’t what they teach at business grad school, but HSY has made it work incredibly well. And in times like these, having HSY in your portfolio is a very good choice.

HSY stock has posted gains in the past 12 months (35%), three months (15%) and year-to-date (6%). That’s a lot better than the S&P 500. And it has a 1.8% dividend.

This stock has an “A” rating in my Portfolio Grader.

JM Smucker (SJM)

company sign outside smucker's headquarters SJM stock

Source: JHVEPhoto / Shutterstock.com

SJM is another niche player that has been around since the late 19th Century. And while its signature product is its jams and jellies, it also has small line of products that have allowed to diversify over the years.

Today is also owns Crisco, Jif (to go with the jelly of course), Folger’s and Dunkin Donuts coffees, as well as a number of popular pet foods like Nature’s Recipe, MeowMix and Milk-Bone, among other brands.

It’s a boutique mix and SJM stock has a $14.5 billion market cap, so it’s a small, large cap, with strong market share in the sectors where it competes.

SJM stock is another proven veteran of the food stocks industry and has gained 21% in the past 12 months and 7% in the past three months, as other stocks have wilted. It also has a rock-solid dividend of nearly 3%.

This stock has an “A” rating in my Portfolio Grader.

Food Stocks: Tyson Foods (TSN)

The corporate headquarters of Tyson Foods (TSN) in Chicago, Illinois. undervalued stocks

Source: Daniel J. Macy / Shutterstock.com

TSN is one of biggest chicken producers in the world. It operates in 10 countries on five different continents. It has an Asia division as well as a Europe division, but it also has a specific China/South Korea division as well as operations in North America.

That means it’s operating in the biggest markets in the world. That kind of global reach for its constantly in-demand products give it significant pricing power. What’s more, TSN is vertically integrated, so it’s able to control its costs better than smaller operations. And much of the risk in raising the chickens is on the shoulders of its contractors who raise the chickens until it time to process them.

And not to be outdone by near-meat competitors, TSN is also working on vegetarian chicken substitutes.

TSN stock is the top performer of the food stocks here, with a 12-month return nearing 50%, and a three-month return of 20%. What’s more, TSN is trading at a price-to-earnings ratio below 10x, and it still has a dividend of 1.9%.

This stock has an “A” rating in my Portfolio Grader.

On the date of publication, Louis Navellier has positions in MDLZ and PEP in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

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Article printed from InvestorPlace Media, https://investorplace.com/2022/02/7-food-stocks-to-store-up-on-amid-inflation-concerns/.

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