It might be easy to dismiss food stocks with so many restaurants still struggling to recover from the global pandemic. But food stocks are a broad category that includes not only the way food is consumed but the way it’s made. In 2020, sustainability and a focus on climate change continue to be important trends in this sector.
Another trend to look at is the ability of companies to deliver food to consumers. It’s not surprising that some of the biggest winners in the pandemic are the restaurants that already had a strong digital presence. Consumers' ability to have a contactless experience from start to finish has been a catalyst for some stocks.
Not surprisingly, those are also the trends that create an opportunity for investors looking to dabble in food stocks. As you look to resetting your portfolio for 2021, it may be time to take a bite out of some of these stocks.
With that in mind, we’ve put together this special presentation that identifies seven food stocks that you should consider adding to your portfolio. In addition to gaining exposure to this sector, some of these stocks present the opportunity for industry-beating gains.
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- Beyond Meat
- Coffee Holding Co.
- Chipotle Mexican Grill
- Albertson's
- Kroger
- IDEXX Laboratories
- Elanco Animal Health
#1 - Beyond Meat (NASDAQ:BYND)
I haven’t been the biggest fan of Beyond Meat (NASDAQ:BYND), and there are reasons for that. However, there’s no question that plant-based foods are a major trend. And Beyond Meat is the only pure-play stock on this trend.
The company has delivered two consecutive quarters of year-over-year revenue growth in the first and second fiscal quarters of 2020. Investors will be looking to see if the company can continue that trend and also if it can start to become consistently profitable. After reporting positive earnings per share (EPS) of three cents in May, Beyond Meat’s profit turned to a negative two cents per share in its most recent quarter.
It remains to be seen if Beyond Meat will consistently deliver strong revenue as other competitors enter the sector, including some of the major packaged meat companies. However, investors that bought the stock at the beginning of the year and held onto it through the pandemic have been rewarded with a stock that has nearly doubled in price.
About Beyond Meat
Beyond Meat, Inc, a plant-based meat company, develops, manufactures, markets, and sells plant-based meat products in the United States and internationally. The company sells a range of plant-based meat products across the platforms of beef, pork, and poultry. It sells its products through grocery, mass merchandiser, club stores, and natural retailer channels, as well as various food-away-from-home channels, including restaurants, foodservice outlets, and schools.
Read More - Current Price
- $5.15
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 3 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $5.50 (6.8% Upside)
#2 - Coffee Holding Co. (NASDAQ:JVA)
Coffee remains one of the best ways to play the food stock sector. Coffee Holding Co. (NASDAQ:JVA) is not known as a company like Starbucks (NASDAQ:SBUX). However, I see an intriguing opportunity with JVA stock that sets it apart.
The millennial generation is more likely to vote for its value. They really like their coffee too. And Coffee Holdings is a way for them to get the best of both worlds. Coffee Holding is a boutique coffee roaster that was touted as one of Forbes’ Best Small Companies in 2011. Unlike some of the other niche stocks in this sector, JVA has managed to hang on.
One reason for that is the company’s values are in line with the issues that millennials care about deeply. On the company’s website, it lists two of its guiding principles as:
- Participate in organizations that partner with coffee growers who share our commitment to respect and safeguard the environment.
- Engage in buying practices that promote ecological sustainability and responsibility both locally and globally.
And the company is also looking to get into the CBD-infused beverage business. JVA has a 49% stake in Jordre Well, a specialty brewer of CBD beverages. JVA expects its initial line of these beverages to be available in Jan. 2021 as part of Jordre Well’s “Stephen James” collection. However, this partnership will also allow Coffee Holdings to branch out into other beverage categories, most notably the seltzer category that is so popular.
Despite being up 76% since the pandemic onset, JVA stock remains down 16.5% in 2020.
About Coffee
Coffee Holding Co, Inc engages in manufacturing, roasting, packaging, marketing, and distributing roasted and blended coffees in the United States, Australia, Canada, England, and China. It offers wholesale green coffee products, including unroasted raw beans that are sold to large, medium, and small roasters, as well as coffee shop operators; and roasts, blends, packages, and sells coffee under private labels in cans, brick packages, and instants of various sizes.
Read More - Current Price
- $3.39
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#3 - Chipotle Mexican Grill (NYSE:CMG)
Even before the pandemic, savvy restaurant chains understood that younger consumers were trending towards takeout and food delivery. However, not every company has been able to take advantage of that trend. Chipotle Mexican Grill (NYSE:CMG) is an exception.
Chipotle helped create the fast-casual category. And so when the pandemic hit, the company was in an ideal position to prosper. The company’s commitment to a fast, efficient digital experience paid off last quarter as the company derived 48.8% of its revenue from digital sales.
And, Chipotle also appeals to a desire for healthy, fresh food options. Plus, Chipotle frequently changes its menu and offers limited-time favorites, such as carne asada, to stimulate pent-up demand in their customers. What makes Chipotle's growth more incredible is that they are maintaining loyalty with consumers even after a food-safety issue that would devastate many companies.
CMG stock is up over 48% for the year and has climbed over 170% since the pandemic.
About Chipotle Mexican Grill
Chipotle Mexican Grill, Inc, together with its subsidiaries, owns and operates Chipotle Mexican Grill restaurants. It sells food and beverages through offering burritos, burrito bowls, quesadillas, tacos, and salads. The company also provides delivery and related services its app and website. It has operations in the United States, Canada, France, Germany, and the United Kingdom.
Read More - Current Price
- $58.88
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $65.27 (10.9% Upside)
#4 - Albertson's (NYSE:ACI)
Turning our attention to grocery chains, one of the food stocks for you to consider is Albertson’s (NYSE:ACI). As if we didn’t know already, we all realized how essential grocery chains are to our way of life. It remains to be seen if the timing was right for Albertson’s to go public through an initial public offering (IPO) in June. The stock is basically flat since it started publicly trading.
However, the long-term outlook for Albertson’s looks very strong. First of all, the company has a strong national footprint. Through a merger with Safeway, while concentrated in the western United States, the company also has a presence in the northeast and Chicago. And in 68% of the markets in which it operates, Albertson’s has either the most or second-most market share. Plus, the company is on a strong growth trajectory. The company forecasts that 60% of its local markets will outgrow the U.S. population by at least 60%.
About Albertsons Companies
Albertsons Companies, Inc, through its subsidiaries, engages in the operation of food and drug stores in the United States. The company's food and drug retail stores offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services. It also manufactures and processes food products for sale in stores.
Read More - Current Price
- $19.13
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $23.58 (23.3% Upside)
#5 - Kroger (NYSE:KR)
Another grocery chain to watch is Kroger (NYSE:KR). When investors focus on retail food stocks, it’s logical for the attention to turn to names like Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT). But Kroger has also been rapidly adapting to a digital environment. The company is partnering with the e-commerce company Miraki to launch a digital marketplace.
And the timing couldn’t be more perfect. An event like our current pandemic has a way of changing long-entrenched habits. It’s quite likely that consumers who have adopted the idea of ordering their groceries online will continue to do so even after the pandemic is over.
And analysts like the direction that Kroger is moving. Kroger has been making a habit of delivering year-over-year increases on the top and bottom lines. And, the company pays a steady dividend that it has increased for the last 13 years. Analysts give the company a consensus price target that suggests the stock may climb approximately 10% higher than its current level.
About Kroger
The Kroger Co operates as a food and drug retailer in the United States. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; and multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys.
Read More - Current Price
- $57.61
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $60.09 (4.3% Upside)
#6 - IDEXX Laboratories (NASDAQ:IDXX)
The last two companies on the list have to do with the convergence of pet care and food stocks. The first of the two is IDEXX Laboratories (NASDAQ:IDXX). IDEXX is divided into several business units. These include small animal diagnostics, a reference laboratory and diagnostic services, veterinary practice management, water quality, diagnostic testing, and software monitoring for managing the herd and flock health and productivity, and bioanalytics.
And in 2020, the stock has even become a sneaky Covid-19 stock. The company’s Opti Medical Systems unit has received Emergency Use Authorization (EUA) from the FDA for its Covid-19 test kit.
All of which means that despite the stock being up 80% for the year, analysts give the stock a price target that suggests the IDXX stock may climb over 15% from its current level. And for its part, the company just delivered an earnings report in which they beat estimates on both the top and bottom lines.
About IDEXX Laboratories
IDEXX Laboratories, Inc develops, manufactures, and distributes products primarily for the companion animal veterinary, livestock and poultry, dairy, and water testing markets in Africa, the Asia Pacific, Canada, Europe, Latin America, and internationally. The company operates through three segments: Companion Animal Group; Water Quality Products; and Livestock, Poultry and Dairy.
Read More - Current Price
- $418.61
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $552.38 (32.0% Upside)
#7 - Elanco Animal Health (NYSE:ELAN)
The last of the food stocks we’re inviting you to look at is Elanco Animal Health (NYSE:ELAN). The amount of money being spent on pet health continues to increase. And Elanco is a “pharmaceutical company that produces medicines and vaccinations for pets and livestock.” The company has 125 brands that are sold in over 90 countries. And according to the company’s website, it is in the top four in all of its major markets.
The stock has been affected by the pandemic as many pet owners have been unable or unwilling to take their pets to the vets. Because of this, ELAN stock is up just 9% for the year. However, a better barometer for the stock may be its performance post-pandemic. The stock is up over 90% since the onset of the pandemic. And analysts love the stock and give it a consensus buy rating with a price target that suggests it may climb over 10% from its current level.
About Elanco Animal Health
Elanco Animal Health Incorporated, an animal health company, innovates, develops, manufactures, and markets products for pets and farm animals. It offers pet health disease prevention products, such as parasiticide and vaccine products that protect pets from worms, fleas, and ticks under the Seresto, Advantage, Advantix, and Advocate brands; pet health therapeutics for pain, osteoarthritis, ear infections, cardiovascular, and dermatology indications in canines and felines under the Galliprant and Claro brands; vaccines, antibiotics, parasiticides, and other products for use in poultry and aquaculture production, as well as nutritional health products, including enzymes, probiotics, and prebiotics; and a range of vaccines, antibiotics, implants, parasiticides, and other products used in ruminant and swine production under the Rumensin and Baytril brands.
Read More - Current Price
- $13.44
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 2 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $17.14 (27.6% Upside)
As investors search for opportunities in 2021, the food solutions market should not be overlooked. By 2025, the global market may rise to $300 billion. Much of this will be due to advances in plant-based products, different methods for food delivery, farming, and animal health.
A new generation of consumers is very interested in where their food comes from. And that is making this a profitable area for innovation that will be rewarded by consumers. However, this also means that you have to pay attention to the valuation of these stocks. Some stocks, like Beyond Meat, maybe overvalued at its current level. However, there are other alternatives for consumers who are looking for value.
Beyond the innovation angle, there is another reason to consider buying food stocks right now. These tend to be defensive stocks. Yes, the market is likely to arise from a future stimulus. But with the possibility of a slower economic recovery, possibly enhanced by targeted lockdowns, this is an area to consider for finding value.
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