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Food Stocks to Buy Right Now

Food Stocks to Buy Right Now

Food stocks are issued by companies that are in the business of making, processing, and distributing food. Usually, the final part of distribution will be picked up by a third party, such as a grocery store. This means that food companies, especially those producing packaged foods, are focused on making the food we eat.

Top Food Companies

From grain-based cereals to condiments to vegetable-based meat substitutes, these are companies that feed America. They also feed investors in the stock market who are hungry for dividend yield and a consistent growth rate in terms of stock price.

Food Industry

People have always needed to eat food, but for many years, there was no such thing as a food industry, let alone food and beverage stocks. Farmers brought their food products (like fruit, vegetables, and live animals) to market, and shoppers would buy raw foodstuffs to prepare at home. There was no such thing as grocery stores.

The agricultural and industrial revolutions brought about huge changes in how food was consumed. People began to congregate in urban areas, which necessitated more processing and packaging of foodstuffs. This was made possible by new production models like the assembly line.

Consumers of the 19th century could now buy dry goods at a general store, and it was during these years that some of the first big-name food companies came into being. The invention of refrigeration for home use in 1913 further changed the food industry. Rationing during WWI, and especially WWII, emphasized canned and packaged goods with a longer shelf life (such as those produced by the Campbell Soup Company) that would decrease burdens on the supply chain.

Even after the war, consumers were left with a taste for mass-produced, packaged goods, even preferring it over home-cooked and natural foods. This meant great cash flow for food and beverage companies. Over the years, companies that specialized in distributing packaged food went public, offering investors the chance to invest in food and beverage stocks.

Today, most of what consumers eat is produced and packaged by a handful of major businesses. These companies are not small-time names among speculative dollar stocks. They tend to be large enterprises that are conservatively financed, see consistent sales, and grow slowly, making them excellent choices for long term growth.

One of the biggest trends shaking up the food industry is a growing consumer demand for healthier products with the components farmed and collected in an ethical way. A consumer today is more concerned about where products come from and how it will impact their body, more so than previous generations. In response, food companies have shifted the components of their supply chain and sourcing in order to cater to these ethical consumer tastes and retain consistent earnings.

Top Food Companies

A quick trip through the supermarket will easily show you that these food companies are at the top of the food chain—at least on Wall Street.

General Mills NYSE: GIS is a Minneapolis-based American food producer, and the name behind well-known cereal labels, such as Lucky Charms, Cheerios, Trix, and Cocoa Puffs. The company also manufactures many frozen and refrigerated goods, including Betty Crocker, Yoplait Yogurt, Columbo Bread, Pilsbury, Old El Paso, Annie’s Homegrown, and Häagen-Dazs.

The General Mills story began in 1856 with the Minneapolis Milling Company. The Washburn family acquired the mill and began building a series of other mills along the river, replacing old grinding stones with the first automatic steel rollers. After merging with 28 other mills in 1928, the company became called General Mills and began paying dividends to shareholders. To this day, General Mills has remained one of the only companies on Wall Street to pay dividends every single year.

Beyond Meat NASDAQ: BYND is a recent player in the food industry. The company started in 2009 and made its products available in 2012. The Los Angeles producer of plant-based substitutes for meat products has already wowed investors with its amazing returns and product lines of faux chicken, beef, and pork.

Beyond Meat is not just available for direct purchase by consumers but has contractual arrangements with some of the country’s biggest distributors of hot meals. This includes fast-food chains and quick-service restaurants like McDonald’s, Hardee’s-Carl’s Jr., KFC, and Subway (noticeably not Burger King). Beyond Meat products are also available in 50 countries outside the US, most noticeably Canada, Germany, and the United Kingdom, where it can be purchased in Tesco stores.

Hershey NYSE: HSY or The Hershey Company is one of the world’s most recognized brand names when it comes to chocolate and snack foods like cookies and cakes. The Hershey story began when Milton Hershey opened a candy store in Philadelphia. Eventually, he tried his hand at the candy business again with the Lancaster Caramel Company—which he sold after observing chocolate-making machines at the 1893 World’s Fair, remarking, "Caramels are just a fad, but chocolate is a permanent thing."

By 1903, production was up and running at his Pennsylvania factory. In 1907, he had introduced a small conical, flat-bottomed candy: Hershey’s Kisses. Chocolate has indeed proved to be a permanent thing among American consumers, and today Hershey is also the name behind Cadbury, Reese’s, and Krave Jerky.

Mondelez NASDAQ: MDLZ is not actually a word, but a humorous composite of the Latin word for world (mundus) and a playful variant of the word delicious. Mondelez International is actually a spinoff of Kraft Foods, the remainder of which merged with Heinz. Today, much of the original Kraft snack food inventory is produced and distributed by Mondelez. This includes many recognizable brand names such as Chips Ahoy!, Oreo, Nabisco, Ritz, Triscuit, Toblerone, Trident, Chiclets, Halls, and Tang.

With a wide variety of chips, cookies, cakes, candy, and powdered drinks, Mondelez products are well-imprinted on the cultural consciousness of American consumers, and around the world. Mondelez operates in 160 countries and pulls in around $26 billion in annual revenues.

Kraft Heinz NASDAQ: KHC was formed by a merger of two enormous food companies in the United States, the Kraft Foods Group, Inc. and Heinz. Today, Kraft Heinz is the fifth-largest food company in America (outranked only by PepsiCo, Tyson, Nestle, and JBS), and the fifth-largest globally, drawing in annual revenues of around $26 billion. Though Kraft is perhaps most famous for Macaroni and Cheese, and Heinz for ketchup, other brands under the company formed by their merger include Boca Burger, Gevalia Coffee, Oscar Meyer, Planters Nuts, and Philadelphia Cream Cheese. Eight of KHC’s 20 different wholly-owned subsidiaries each boast revenues of more than $1 billion.

The original Kraft Foods Group began in 1923, set out to execute a broad merger strategy to unify a fragmented ice cream industry. Heinz was formed in 1869 by a German immigrant focused on making horseradish before switching to a focus on its now-famous ketchup. Today, Warren Buffett’s holding company Berkshire Hathaway is a 52% owner of Kraft Heinz.

Kellogg’s NYSE: K is a Michigan-based food company producing cereals and breakfast foods like Corn Flakes, Frosted Flakes, and Eggo waffles—along with snack foods like Pringles and Cheez-It. Kellog’s products are sold around the world in 180 countries, and the company even has a Royal Warrant for the Royal Family (meaning, a contract to supply food to the court). But despite those accolades from across the pond, Kellog’s is certainly an American company, albeit with an intriguing story. In 1894, the Kellogg brothers were put in charge of the Battle Creek Sanitarium—where they accidentally discovered corn flakes. Former patients were requesting shipments of corn flakes, and soon the business took off and became the Kellogg Company.

Over the next decades, Kellogg’s was one of the companies that stamped the idea of cereal consumption on the American cultural consciousness. In recent years, the company has acquired other food businesses like Keebler, Kashi, Morningstar Farms, and Pringles, which it purchased from Procter & Gamble.

Food ETF

Picking stocks to maximize returns is hard, even in stable industries like consumer staples. What seems like a great buy might end up being one of the biggest stock losers. A great way for retail investors to minimize risk is to purchase shares of an ETF, or exchange-traded fund. An ETF is a pooled investment vehicle, sort of like a mutual fund. But unlike a mutual fund, contributions are not made in cash. Instead, shares are purchased just like individual stocks bought and sold on Wall Street.

The Invesco Dynamic Food & Beverage ETF is a blend of large, mid, and small-cap stocks. Top holdings include Mondelez, Hershey, General Mills—and other recognizable, consumer-facing names like Coca-Cola and Pepsico. Some of the portfolio is also invested in companies that wholesale to restaurants and fast-food chains, such as Sysco Foods.

The Consumer Staples Select Sector SPDR Fund (XLP) is another great ETF to watch, and one of the largest funds specifically dedicated to consumer staples. Around 25% of the fund is invested in food retailers like Walmart, and around 40% in beverage companies like rival soft drink companies Coca-Cola and Pepsico. But the SPDR Fund is not just about food. There are also investments in consumer goods companies like Procter & Gamble (the name behind Crest and Charmin) and Philip Morris International.

Are Food Stocks a Good Investment for You?

Most food companies have been around for several decades, so they won’t necessarily be in the list of cheap stocks to buy now. At the same time, these companies tend to be reasonably valued, and so their stock prices are not only affordable but accurately reflect the value of an investment (unlike other industries like tech).

Food is a stable business, with a never-ending stream of consumers who need the goods provided by these companies. They also tend to be conservatively financed, family-run operations that have been doing great business for decades. Since their growth is slow and steady, they tend to take their profits and pay out to investors, rather than reinvesting it. This makes them great choices for a dividend investing strategy.

There are other related industries in the food and beverage game, such as grocery stocks and restaurant stocks. Restaurant stocks, while serving food, do fall more into the category of consumer discretionaries, which can be impacted by market downturns. Grocery store stocks are also a solid investment, but even many of the largest chains of grocery stores are nowhere near the size of these major producers of packaged foods and beverages.

While you never want any one stock, or even one industry, to dominate your portfolio, food stocks are a safe bet and a great choice for setting up the foundation of your stock investments. Their predictability will help stabilize your portfolio when other types of investments go up and down, and their long-term growth will keep it consistently increasing in value.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
General Mills (GIS)
4.1448 of 5 stars
4.14 / 5 stars
Beyond Meat (BYND)
1.3954 of 5 stars
1.40 / 5 stars
$6.08-1.3%N/A-1.18Strong Sell$5.56
Hershey (HSY)
4.3066 of 5 stars
4.31 / 5 stars
Mondelez International (MDLZ)
4.7895 of 5 stars
4.79 / 5 stars
Kraft Heinz (KHC)
4.8072 of 5 stars
4.81 / 5 stars
$33.05+0.8%4.84%14.43Moderate Buy$38.83
Kellanova (K)
3.3443 of 5 stars
3.34 / 5 stars
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