For decades, food stocks have been a cornerstone of every conservative portfolio. Why? The answer is as simple as it gets: the global food industry is immense in size. As there is no way for human beings to live without food, its high demand and high production will always exist.
Regardless of the economic environment, consumers do and will spend money on food. Even while recessions may affect food spending, the impact is usually significantly less than that of other types of consumer spending.
For that reason, investing in food stocks is considered a safe endeavour, serving up “appetising” returns to patient investors, either through commodities, packaged food stocks, grocery store stocks or restaurant stocks.
In this article, we take a closer look at the modern food industry and browse through a range of the best food stocks to invest in before 2019 comes to an end.
Food industry overview
The global food chain is vast. When you think about it, the first market players that come to your mind might be the farms that grow the food, supermarkets that sell it and the restaurants that serve it.
However, in reality, the network is much larger. Within a food chain, there are a handful of sub-industries, contributing to getting food created and delivered to your plate. These include chemical businesses that produce fertilisers, manufacturers that build machines used on farms, producers who process raw materials into packaged goods, and distributors who move them all over the globe.
Americans spend about 10% of their disposable income on food. According to the Bureau of Labor Statistics, in 2018, US consumers, government entities and businesses spent more than $1.71 trillion on beverages and food in grocery stores and other retailers and on away-from-home meals and snacks. And this figure does not even include the global food market, which feeds a population over 20 times the size of the US.
That statistic has remained relatively stable for the last twenty years. This consistent demand for food products has seen many investors stick to the food stocks as an excellent option for defensive portfolio allocations.
What are the trends in the industry?
Over the past decade, the food industry has seen major transformations. That’s because of several factors that have entered the market.
First and foremost, there is a lot more competition in the food stocks space than there used to be.
Another issue is that people’s consumption habits have changed, not just domestically, but globally. People have increasingly been choosing “healthy” foods, ditching old favourites like cereals and snacks. The trend for growing desire for natural and organic food has serious implications for chemical companies, food processors and restaurants.
A number of new digital-friendly food companies are taking the lead, stealing market share from the legacy providers. On the other hand, while some legacy food stocks have faced slowing growth and declining revenues, others have figured out how to adapt to the new trends and reap the opportunities.
Even though many investors are now shifting towards next-generation organic, meatless and agrifood technology companies, the past couple of years have proven to be rather lucrative for old-fashioned fast-food chains.
Legacy names of the fast food stocks list have seen all-time high stock prices in 2019, from McDonald's, KFC and Taco Bell’s owner YUM! Brands. This is largely due to investments in digital engagement and third-party delivery that have boosted sales and revenue in recent quarters.
For instance, despite some price fluctuations, McDonald's stock has enjoyed a general trend of overall growth during this year. According to ETFTrends.com, the company has seen its stock hit all-time highs 18 times so far in 2019. The share price went from $176 at the beginning of the year up to $221 in August.
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There are tens of thousands of companies involved in the food supply. However, if you are looking for retail or restaurant stocks to buy, note that not all of them can serve you well as investments in your portfolio.
That is why we have made a list of the most notable food stocks available in the market today.
Top food stocks to keep on your radar at the end of 2019
As we already know, the term “food stocks” may refer to a variety of businesses and can include, among others, production, packaging, retail and restaurant stocks.
The number of publicly traded food-related companies is large, making food stocks list rather extensive. The leaders in terms of market capitalisation include a growing e-commerce grocery business and the owner of Whole Foods – Amazon.com - AMZN ($883.29 billion); a multinational retail corporation that operates a chain of discount department stores, hypermarkets and grocery stores – Walmart - WMT ($340.57 billion); a Swiss multinational food and drink processing conglomerate corporation – Nestle - NESN ($298.25 billion); the world's most popular fast-food chain – McDonald's - MCD ($159.37 billion), and a massive wholesaler of food and other products – Costco - COST ($132.37 billion).
In the background is a wealth of other publicly traded companies from different countries and sectors, presented by Archer Daniels Midland - ADM, Bunge - BG, Mosaic - MOS and Calavo Growers - CVGW in agribusiness; McCormick - MKC, Mondelez International - MDLZ, Danone - BN, Conagra Brands - CAG, Coca-Cola - KO, J. M. Smucker Company - SJM and Kellogg - K in food and beverage processing and production; Unilever - ULVR in packaging; Target - TGT, Tesco - TSCO, Sainsbury’s - SBRY and Ahold - AD in food retailing; Starbucks - SBUX, Dunkin Brands - DNKN, Dominos - DPZ, Papa John's International - PZZA and YUM Brands - YUM in catering business.
In addition to these, we have made a compilation of the 8 best-performing food stocks to invest in today, based on the YTD performance as of October 22, 2019:
Ticker symbol: SYY
Current market capitalisation: $40.68 billion
Year-to-date return: +26.81%
Description: an American multinational corporation engaged in marketing and distribution of food products, kitchen equipment, smallwares and tabletop items to restaurants, hospitality businesses like hotels and inns, healthcare and educational facilities and other companies that provide food services.
Ticker symbol: QSR
Current market capitalisation: $32.14 billion
Year-to-date return: +29.08%
Description: a Canadian multinational fast-food holding company, operating and franchising quick-service restaurants, including Tim Hortons, Burger King and Popeyes.
Ticker symbol: SAFM
Current market capitalisation: $2.98 billion
Year-to-date return: +35.48%
Description: an American poultry processing company engaged in the production, processing, marketing and distribution of chicken. It is the third-largest poultry producer in the US.
Ticker symbol: WEN
Current market capitalisation: $4.98 billion
Year-to-date return: +39.62%
Description: an American holding company involved in operating, developing and franchising a major fast-food restaurants chain, Wendy's, specialising in hamburger sandwiches.
Ticker symbol: HSY
Current market capitalisation: $31.77 billion
Year-to-date return: +43.29%
Description: an American company and one of the world’s largest chocolate manufacturers. It also produces a variety of other products, including cakes, cookies, milkshakes, drinks and many more.
Ticker symbol: CPB
Current market capitalisation: $14.42 billion
Year-to-date return: +45.17%
Description: an American processed food and snack company engaged in manufacturing and marketing of branded convenience food products, such as soups, sauces, biscuits and confectionery.
Ticker symbol: TSN
Current market capitalisation: $28.96 billion
Year-to-date return: +51.63%
Description: an American multinational corporation engaged in the production of processed food. The company is the world's second-largest processor and marketer of beef, chicken and pork.
Ticker symbol: SMG
Current market capitalisation: $23.61 billion
Year-to-date return: +97.21%
Description: an American chain of fast-casual restaurants, specialising in tacos and burritos and operating across the US, UK, Canada, France and Germany.
You may now wonder: “How do I choose a really worthy stock in such abundance?” Well, the rule of thumb here remains the same as for any other investment: do your research. Study a company's strategy for growth and expansion; analyse the competitive landscape and see how the company differentiates itself from its rivals; check out the company’s financial statements and research its management team.
How to invest in food stocks? In modern trading realm, there are actually a plethora of ways to add those to your investment portfolio. However, one of the easiest - is through contracts for difference, or CFDs. You can learn more about CFD trading with our free online courses.
Food is the ultimate commodity of all times. Make sure to stay on top of the latest food stocks news with Capital.com to keep up with the trends and take advantage of emerging trading opportunities.