Concerns about interest rate hikes and inflation have caused a downturn in the stock market. Many technology stocks have suffered because of these macroeconomic headwinds, and now looks like a good time to consider diversifying your portfolio by adding stocks of companies that provide stability and consistency.
Food stocks can offer protection and fair returns during both upward and downward economic trends. Another reason to invest in this defensive sector is that it is undergoing significant changes focused on health benefits, environment, safety, and transparency.
Since the outbreak of Covid-19, the food industry has seen numerous emerging trends as individuals have been increasingly concerned about their health. Thanks to the increasing awareness of food safety measures and scientific developments, consumers now have a better understanding of the quality of the food they consume.
The lifestyle choices, living standards, and diets of consumers are changing. The pandemic has sparked a long-term transition in the food business toward healthier, environmentally friendly products. These trends show no indications of slowing, and regardless of the state of the economy, companies that are driving these trends forward are projected to have a steady demand for their products and services. The food industry is continuing to innovate as two popular indexes track the future of food industry performance.
The Global X AgTech & Food Innovation ETF (NASDAQ: KROP) invests in companies that are developing agricultural products and food technology innovations, such as precision agriculture, agricultural robots and automation, controlled environment agriculture, agricultural biotechnology, protein/dairy alternatives, and food waste reduction.
The VanEck Future of Food ETF (NYSEARCA: YUMY) is an actively managed fund that invests in global companies involved in sustainable agriculture and food innovation. Food technology, precision agriculture, and agricultural sustainability are among the three sectors covered by the actively managed fund, with ESG barometers factored into the investment process.
Exhibit 1: March Performance of KROP and YUMY (daily % change)
As manufacturers respond to changing demand, the outlook for the food sector has turned positive, providing an intriguing opportunity for investors to gain exposure to this sector. On that note, these four food stocks are worth keeping an eye on because they are projected to beat the indices in the near future, similar to how these companies have beaten the performance of food industry benchmarks so far this year.
Ingles Markets, Incorporated (NASDAQ: IMKTA)
Ingles Markets, Incorporated is a supermarket chain in the southern United States with almost 200 stores. Its product offering includes groceries, meat, dairy products, frozen food, and other perishables, as well as gasoline, dairy operations, and shopping center rentals.
With revenue of $4.98 billion in 2021 and grocery products accounting for 35.3% of total sales, the company’s revenue has been continuously increasing, and its cash flows appear to be healthy. IMTKA is up close to 9% this year, while KROP is recovering and trading at the same level as it was at the start of the year. YUMY, on the other hand, has a negative 9% year-to-date return.
MeaTech 3D Ltd. (NASDAQ: MITC)
MeaTech is a global deep-tech food firm established in Israel. The company aims to develop slaughter-free meat products, such as cultured fat, hybrid, ground, and whole cuts of meat, using biotechnology and engineering capabilities as a replacement for industrialized animal farming.
The company has celebrity backing. It has partnered with Hollywood actor and entrepreneur Ashton Kutcher who will help MeaTech become a global leader in cultured meat production.
The company recently announced plans to extend its footprint in the United States by building a new facility that will provide them access to accelerate their R&D capabilities. Also, MeaTech’s wholly owned Belgium subsidiary, Peace of Meat, signed a term sheet agreement to complete a 21,530 square foot pilot plant and R&D facility by 2023 to scale up manufacturing of cultured fat biomass. Cultured fat is crucial in the development of cultured meat and will also be offered as an ingredient to enhance the meaty flavor and mouthful of plant-based alternative meat products.
MITC seems to have been experiencing a recovery over the past few weeks, having gained over 10% month-to-date. Given this, and the previous highs we’ve seen from the stock, it would be reasonable to conclude that the stock is gaining momentum as investors acknowledge the growth potential of the company. Moreover, it seems that this recovery may just be starting which positions the stock currently as potentially undervalued and a unique buying opportunity.
Beyond Meat, Inc. (NASDAQ: BYND)
Beyond Meat, Inc. is a plant-based meat substitute company established in the United States and in 2019 became the first plant-based meat company to file for an initial public offering (IPO). The company offers plant-based substitutes for beef, meatballs, ground meat, pork sausage links, and patties.
Because of its market domination, Beyond Meat was a significant winner during the pandemic. Aided by collaborations with McDonald’s, KFC, Pizza Hut, and Taco Bell, the company is moving in the right direction to secure long-term competitive advantages. Beyond Meat stock has also gained traction in the last few weeks after a tough start to the year.
Tyson Foods, Inc. (NSE: TSN)
Tyson Foods, an American multinational food company that manufactures a range of frozen and refrigerated food products, completes this list. In addition to its food products, the company has an integrated operation that includes breeding stock, contract farmers, feed production, chicken processing, and transportation. Tyson’s total sales grew to $12.9 billion in the first quarter of fiscal 2022, up more than 24% year-over-year, helped by its multi-protein portfolio. TSN has gained 5% year-to-date.
As the food industry continues to evolve, many young and established food companies are likely to emerge as big winners in the next few years. Investing in these companies today could help investors enjoy lucrative investment returns in the future.