It
has not been a happy gathering of food companies at the consumer
industry conference. ConAgra Foods, J.M.
Smucker and Mondelez International all recently reported dismal
results. But not all food stocks are down.
Kraft (NASDAQ: KRFT), which has a huge
overseas presence, reported that sales volume rose by four percent. And Kraft’s
success should become more common in the sector. There are three reasons for
investors to be long-term bulls on the food sector.
There
is growth ahead overseas.
One
billion new consumers will join the middle class in emerging market nations,
according to “Urban world: Cities
and the rise of the consuming class,” a report from McKinsey &
Company, a global consulting firm. That will increase consumer spending in the
trillions around the world. A more affluent diet always receives the bulk of
increased discretionary spending. While this trillions more in consumer
spending will lift all of the stocks in the sector, perhaps
companies with a strong international presence, like Kraft, will benefit more.
Related: 3 Reasons To Be
Bullish On Collector’s Universe
The
companies can get leaner.
Leave
it to legendary investor Warren Buffett to improve the sector. His takeover
of Heinz has featured much more cost cutting than was thought
possible. That may inspire other food companies to reduce spending. From that,
profits will rise.
Niche
food companies will do better.
As detailed in a
previous article on
Benzinga, food companies with a niche should prosper. Entities such
as SoupMan (OTC: SOUP) and Hormel (NYSE: HRL)
cater to unique segments of the market. SoupMan has had 39.40 percent
quarterly revenue growth. The appeal of Hormel’s Spam around the world has
resulted in tasty results for the shareholders of Spam. SoupMan feeds the
growing demand of the urban class for packaged meals of a high quality in
appealing flavors.
In
addition to the promising outlook, there are plenty of food stocks of all
types.
From
blue chips like Kraft Foods to small caps like SoupMan, investors have a wide
variety. For income, Hormel Foods is appealing due to its history of increasing
the dividend. With quarterly revenue growth surging by nearly 40 percent, it is
difficult to top SoupMan as a growth stock. For long-term investing, there
a variety of tempting stocks in the food industry.
Read more
Benzinga.com small-cap articles: http://www.benzinga.com/news/small-cap
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