How to Make the Most of Your 2024 Food Stocks Investment

October 12, 2023

Investing in food stocks can be a smart move for any investor looking to diversify their portfolio. The food industry is a stable and essential part of the economy, making it a reliable investment option. With the right strategies and knowledge, you can make the most of your 2023 food stocks investment.

In this article, we will discuss the key factors to consider and steps to take to ensure a successful investment in the food industry. We will also delve into the importance of understanding the food industry, analyzing stock market trends, and the several factors to consider before investing.

Identifying the Best Food Stocks

Before diving into the specifics of food stocks investment, it is crucial to have a good understanding of the food industry and its potential. The food industry is a vast and diverse sector that encompasses everything from agriculture and farming to food processing and distribution.

It is a crucial part of the global economy, with a market size of over US$9.36 trillion in 2023 and expectations to grow annually by 6.74% (CAGR 2023-2028). This growth is driven by various factors, including population growth, urbanization, and changing consumer preferences.

Food market revenues showed by categories; source: Statista Market Insights.

One of the main reasons why the food industry is a promising investment option is its stability. People will always need food, regardless of economic conditions, making it a recession-proof industry. Additionally, the growing global population and increasing demand for healthier and sustainable food options present significant growth opportunities for the food industry.

Furthermore, advancements in technology and innovation in the food industry, such as the rise of food delivery apps and plant-based alternatives, are creating new avenues for growth potential and investment.

Food Stocks: Top Picks for 2023

To make the most of your food stocks investment, it is essential to analyze the current trends in the market. The food stock market is a little bit volatile, and understanding its patterns can help you make informed investment decisions. In recent years, the food industry has seen steady growth, with some fluctuations due to external factors such as weather conditions and trade policies.

It is crucial to keep an eye on the performance of major food companies and their stocks. Look for companies with a strong financial track record, stable growth, and a solid market position. These are indicators of a company's potential for long-term success and can help you make a wise investment choice.

It is also just as important to stay abreast of industry news. Keeping your hand on their pulse can definitely be helped by the Urvin Finance app, which has a special real-time updated dash board with news dedicated to this sector.

Additionally, understanding the elements that influence the performance of food stocks, such as commodity prices, consumer trends, and regulatory changes, can help you anticipate potential risks and opportunities.

Importantly, you cannot forget about other factors influencing particular companies, like growth potential, inflationary pressures, and comparison of net income achieved year to year in the same period of time.

What's more, you must also remember that food stocks are a much broader industry than food products themselves: it also includes beverages, grocery stores, snack brands, restaurants, fast food, etc. This means that giants such as Coca Cola, Kraft Heinz, General Mills, Mondelez International, Mcdonald's or Cal-Maine Foods (the owner of Land O'Lakes) and Tyson Foods (animal protein company) - as well as much less iconic brands, like Sprouts Farmers Market (organic food segment) - fall into this category. The food business is really diversified - so we are sure that each investor will find something for himself in this sector.

Food Industry to Watch

As always, the key to success for food and beverage companies investments is to bet on a diversified portfolio. When picking the best food stocks, it is worth making a wise choice, and diversify by product, geography, current consumer preferences and industry trends.

If we were to choose the top food stocks, we would bet on the food companies listed below:

1. Starbucks (SBUX)

Starbucks has been mentioned in almost every best food stocks list for years. This is for a good reason - it is a true food sector giant that has been enjoying international triumphs for more than just the past few years.

The company was founded in the US in the 1970s and revolutionized the way people drink coffee, elevating the ritual of takeaway coffee to a new trend of our time. The company's business model was uncommonly innovative for its time and fit perfectly into the whole culture of striving and consumerism.

Coffee in a white cup with a well-known logo became an object of desire to such an extent that some buyers did not throw away the cups, but paraded them empty on the streets. At the moment, the company has >37,000 stores present in various countries around the world, of which 51% of the stores are owned by Starbucks - and the rest are franchised.

Of course, the pandemic hit the company - but it's worth noting that the firm has already recovered from the losses with a significant increase, and sees its future in the Chinese market, where it intends to open a significant number of new outlets in the near future.

If you're not sure whether Starbucks is one of the good food stocks to buy, check what its revenue and gross profit levels look like.

 In the last 10 years, SBUX sales increased by more than 130%
SBUX gross profit is at all time high - screen from the tool.

Only in the United States North America and China, at this point, the company has more than 75 million members of the Starbucks Rewards Program, growing year-on-year by a 25%.  

2. PepsiCo (PEP)

You probably associate PepsiCo with being a major competitor to Coca Cola. But the company is much more than that: it is a powerful multi-brand business, with beverages such as Mountain Dew and Gatorade in the company's portfolio, but also other extremely popular dairy products such as Lay's, Doritos, and Cheetos. As you can see for yourself - this is a really solid position when it comes to food stocks investing strategy. No wonder PEP currently has a market cap of over 200B USD.

2023 itself was also a successful year for the company - organic revenues grew by 16% thanks to a price increase (which, however, was accepted by consumers without negative comments). The company continues to prove that it is able to shift de facto upward-trending costs onto the shoulders of consumers - successfully. PepsiCo's pricing power is doing well - and there is no indication that it will be shaken in any way in the near future. It translates to increasing profits the company offers the investors. Just take a look:

Last 5 years were exceptionally good for PepsiCo's profits - screen from the tool.

It's a tactic that many food companies can't afford - but no matter how you look at it, there's powerful marketing behind this company, and there's a reason PepsiCo is called one of the top love brands. Prices therefore play a less significant role than brand loyalty itself. So if you are looking for food stocks to buy - it is worth taking a closer look at this company.

3. General Mills (GIS)

General Mills are expert in packaged foods. It owns brands such as Häagen-Dazs, Progresso, Pillsbury, Cheerios - and literally dozens of others, which bring its market cap to around 40B USD.

What's more, the giant is one of the not-so-many food stocks whose pandemic, instead of harming them, has resulted in tangible profits. Customers were forced to bypass restaurants by a wide margin - and willingly, at the time, turned to ready-made meals and baked goods possible to eat at home.

Even though the operating cash flow doesn't look too impressive, earnings per share keep increasing and according to analysts will keep doing so.

General Mills Free Cash Flow - screen from the tool.

Moreover, General Mills, like PepsiCo, has set its sights on raising its prices, which contributed to a measurable revenue increase. And this is definitely not their last word: their growth potential can be really attractive for long-term investors.

Interestingly, the company, despite being definitely well-positioned to grow its market share, also focuses on strong brands that go somewhat beyond the mainstream of potential investments - suffice it to mention that in 2018 they acquired Blue Buffalo, a leading producer of pet food in the USA. Taking into account the number and diversification of their brands, they have become basically immune to various economic downturns.

Food Companies: Food Focused ETFs

For those of you who focus on food ETFs - we are in a hurry with good news. You can stay up to date with tracking more food stocks thanks to FTXG: First Trust Nasdaq Food & Beverage ETF.

FTXG: First Trust Nasdaq Food & Beverage ETF - screen from the tool.

More committed investors may also want to check out the following list for finding other great investment opportunities:

  • KXI: iShares Global Consumer Staples ETF;
  • XLY: Consumer Discretionary Select Sector SPDR Fund (if you accept that almost 50% of its holdings are just 3 companies: Amazon, Tesla, and Home Depot);
XLY biggest holdings - screen from the tool.
  • EATZ: The Restaurant ETF;
  • or PEJ: Invesco Dynamic Leisure and Entertainment ETF.

Summing Up

Investing in food stocks can be a lucrative opportunity for investors looking to diversify their portfolios and generate consistent returns. By understanding the food industry, analyzing stock market trends, and considering key aspects before investing (including consumer preferences and the matter of company revenue), you can make the most of your 2023 food stocks investment.

Remember to diversify your portfolio, invest for the long term, and stay informed to make wise investment decisions. With the right strategies and knowledge, you can potentially see significant returns on your food stocks investment in the coming years.

Investing always comes with risks, and it's important to do your due diligence before making any investment decisions. However, with careful planning and strategic decision-making, you can make the most of your food stocks investment and potentially achieve your financial goals.

We keep our fingers crossed that you will become the next Warren Buffett - regardless of whether you choose Tyson Foods, PepsiCo, Kraft Heinz, Mondelez International or some other alternative!

Psst... if you want to check out companies from other sectors that are worth considering - be sure to check out our list of best luxury stocks to buy!

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