4 Stocks Outperforming the Major Future-of-Food ETFs

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)

Chart, line chartDescription automatically generated
Source: Google Finance Historical Price

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.

Wall Street Week Ahead Earnings: KKR, Walt Disney, Coca-Cola, Twitter and PepsiCo in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 7

Monday (February 7)

TICKER COMPANY EPS FORECAST
ACM AECOM $0.77
CHGG Chegg $0.13
HAS Hasbro $0.85
LEG Leggett & Platt $0.73
ON ON Semiconductor $0.94
THC Tenet Healthcare $1.49
TSN Tyson Foods $2.01

 

Tuesday (February 8)

IN THE SPOTLIGHT: KKR

The U.S.-based investment firm KKR & Co is expected to report its fourth-quarter earnings of $1.02 per share, which represents year-over-year growth of over 108% from $0.49 per share seen in the same period a year ago.

The company that manages multiple alternative asset classes would post revenue growth of 17% to $784.8 million. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“Strong near-term growth with fundraising supercycle and GA accretion coming into earnings, but we see this reflected in the price at the current valuation for a business model with greater earnings contribution from the balance sheet (40%). While strong investment performance could drive upward estimate revisions, we have less visibility on more episodic investment income gains,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“Mgmt’s increased focus on expanding the platform with adjacent strategies and scaling successor funds should drive higher fee-related earnings (FRE).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 8

TICKER COMPANY EPS FORECAST
BP BP $1.18
IT Gartner $2.47
HOG Harley-Davidson $-0.37
LYFT Lyft $-0.46
PFE Pfizer $0.85

 

Wednesday (February 9)

IN THE SPOTLIGHT: WALT DISNEY

Walt Disney, a family entertainment company, is expected to report its fiscal first-quarter earnings of $0.68 per share, which represents year-over-year growth of over 112% from $0.32 per share seen in the same period a year ago.

The family entertainment company would post revenue growth of over 30% to $21.15 billion. The company has beaten earnings estimates in most of the quarters in the last two years, at least.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 9

TICKER COMPANY EPS FORECAST
AFG American Financial Group $2.98
CVS CVS Health $1.56
HMC Honda Motor $0.95
RDWR Radware $0.13
SGEN Seagen $-0.74
TM Toyota Motor $3.76
UBER Uber Technologies $-0.33

 

Thursday (February 10)

IN THE SPOTLIGHT: COCA-COLA, TWITTER, PEPSICO

COCA-COLA: The world’s largest soft drink manufacturer is expected to report its fourth-quarter earnings of $0.41 per share, which represents a year-over-year decline of over 12% from $0.47 per share seen in the same quarter a year ago. However, the company’s revenue would grow nearly 4% to $8.94 billion.

TWITTER: The social media giant is expected to report its fourth-quarter earnings of $0.35 per share, which represents year-over-year growth of about 8% from $0.38 per share seen in the same period a year ago.

The company would post revenue growth of over 21% to $1.57 billion. Twitter expects revenues of approximately $1.5 billion to $1.6 billion in the fourth quarter of 2021. GAAP operating income is expected to range from $130 million to $180 million, according to ZACKS Research.

With a focus on engineering and products, Twitter expects to increase headcount and costs by 30% or more in 2021. In 2021, the company expects total revenues to grow faster than expenses.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for Twitter (TWTR) given 1) continued turnaround progress and 2) platform scarcity,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

PEPSICO: The Harrison, New York-based global food and beverage leader is expected to report its fourth-quarter earnings of $1.52 per share, which represents year-over-year growth of over 3% from $1.47 per share seen in the same period a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of about 9% to $24.35 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

The company revised its organic revenue growth to 8% from 6% previously. The company estimates core earnings of $6.20 per share for 2021, compared to $5.52 in 2020, according to ZACKS Research.

PepsiCo struggles with supply-chain headwinds that have caused it to increase costs and limit its output. Investors will want to know whether the beverage company is winning this battle when it reports its financial results for the fourth quarter of 2021 on Thursday, February 10.

“For the quarter, we are expecting PepsiCo (PEP) to deliver EPS of $1.47, which implies flat YoY growth and is 4 pennies below consensus EPS of $1.51. Our $1.47 4Q21 estimate implies FY21 EPS of $6.20, which is at the low end of management’s expectation to deliver “at least” $6.20 in EPS and may ultimately prove conservative given PepsiCo’s (PEP) history of outperforming expectations. Since 1Q18, we can see that PEP’s reported EPS has come in above consensus in 14 out of the past 15 quarters, with an average upside surprise of+5%,” noted Vivien Azer, equity analyst at Cowen.

“As we are already almost a month into the new year, all eyes will be on PepsiCo’s (PEP) initial FY22 guidance. As a reminder, on the last earnings call management noted that at the time they expected FY22 performance to be in line with its stated long-term targets, which means MSD (+4-6%) organic revenue growth and HSD core constant currency EPS growth.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 10

TICKER COMPANY EPS FORECAST
AZN AstraZeneca $0.78
EXPE Expedia Group $-0.01
GDDY GoDaddy $0.41
K Kellogg $0.8
MCO Moody’s $2.3
PEP PepsiCo $1.52
TWTR Twitter $0.16
WU Western Union $0.53

 

Friday (February 11)

TICKER COMPANY EPS FORECAST
APO Apollo Global Management $1.08
D Dominion Energy $0.93
FTS Fortis $0.58
MGA Magna International $0.81

 

2 Stocks From This Defensive Sector Buck The Trend During Market Selloff

After Federal Reserve meeting minutes pointed to a faster-than-expected rise in U.S. interest rates, the 4 major U.S. indices – S&P 500 (SPX), Nasdaq Composite (IXIC), Dow Jones (DJI) and Russell 2000 (RUT) fell significantly. The volatility similar to the Black Friday’s selloff last year is back.

Despite the market selloff, there are still a few dozen stocks showed up in my screener, which is under beta testing. After further filtering based on the price structure and the relative strength, one defensive sector stands out because there are still quite a number of stocks such as Coca-Cola (KO), General Mills (GIS), Tyson Food (TSN), Pepsico (PEP), etc… in a strong up trend and outperform the S&P 500.

Visit TradePrecise.com to get additional market insights and test results from my stock screener in email for free.

The following 2 stocks are selected based on the price volume analysis and could still provide decent reward to risk ratio with a relatively low risk trade entry. Consumer staples is one of the well-known defensive sectors and these 2 stocks are under the Food Products industry group.

Hershey Foods (HSY) Price Volume Analysis

From the weekly chart as shown below, HSY has formed an accumulation range lasted 18 months from September 2019 until March 2021. After breakout from the accumulation structure, HSY had a steady rally and a shallow pullback from July-November 2021.

Since December, HSY broke above the resistance at 180 and continued to trend up despite the increasing volatility showed up in the broad market.

It can be observed that the volume within the accumulation structure has been decreasing, suggested that the supply is exhausted, which is a classical volume pattern based on the Wyckoff method. If you would like to find out more on the application of Wyckoff method, watch the YouTube video to find out how I derive the directional bias for the current market.

On the daily chart below, HSY is on a climatic run with the presence of supply, which could be vulnerable for a pullback. Should a reversal happen near the axis line at 192 where the resistance-turned-support, that could provide a decent entry by leaning on the support level at 192.

Flowers Foods (FLO) Price Volume Analysis

FLO has started an accumulation range from September 2020-2021 (refer to the chart below). After the breakout in October 2021 followed by a shallow pullback tested the resistance-turned-support area at 24.5, the markup phase started. So far, FLO is travelling within an up-channel, forming a higher high and a higher low.

It is worth noting the two volume spikes as highlighted in yellow because those two bars containing increasing of supply, which essentially stopped the short term up move. After the spike of volume in the first bar in mid of November, a pullback took place and tested the demand line of the channel.

After an even higher spike of volume in the second bar in mid of December on the breakout, the pullback is mild and shallow with decreasing volume, suggested the supply showed up on the breakout bar has been absorbed.

In the latest 2 bars, there are presence of supply as reflected in the increasing volume together with the rejection tail and the smaller price spread, which could be vulnerable for a pullback. Watch out for a pullback or consolidation before the next rally. A reversal entry or a breakout entry is viable while leaning the support at 27.5.

As the bias for the short term direction of the market is down plus the deterioration of the market breadth, it is essential to monitor how the price of HSY and FLO reacts and wait for a confirmation before execution.

Meatpacker Tyson Foods Mandates Vaccines for Workers

Surging COVID-19 cases and new guidance from the U.S. Centers for Disease Control and Prevention (CDC) that requires fully-vaccinated individuals to wear masks have led many companies to rethink their plans.

Many of corporate America’s biggest names have taken action following the CDC’s guidance, including mask mandates from McDonald’s Corp, Apple Inc and vaccination requirements by Walmart and Walt Disney.

U.S. officials said on Monday COVID-19 cases, along with hospitalizations and deaths from the virus, have increased in the last week, even as vaccination rates have seen a pick up amid concern over the highly contagious Delta variant.

The CDC said there were about 72,000 new COVID-19 cases per day in the United States as of Saturday, a 44% increase over the previous week and higher than the peak set in the summer of 2020.

Tyson said on Tuesday its employees at U.S. office locations should be fully vaccinated by Oct. 1, while other locations have until November. It added that nearly half its U.S. workforce were vaccinated.

Labor unions and meat companies have been pushing states to increase the pace of vaccine rollout in the food sector to protect workers and avoid supply-chain disruptions from COVID-19 outbreaks, such as closures of slaughterhouses last year.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Krishna Chandra Eluri)

U.s. Meat Giant Tyson Foods to Launch Plant-based Food in Asia-pacific

Impossible Foods Inc, Nestle SA, Beyond Meat Inc have already entered Asia with their plant-based meat products, expecting rising demand for the protein from consumers conscious about health, animal welfare and the environment.

Retail sales of meat substitutes in Asia-Pacific reached $16.3 billion in 2020 and are expected to exceed $20 billion by 2025, according to data provided by Euromonitor to Tyson Foods.

“The Asian market is a natural fit for this category with traditional plant-based products like tofu already entrenched in the culture,” Tan Sun, president, Tyson Foods Asia-Pacific, said in a statement.

Tyson Foods, the biggest U.S. producer of animal meat by sales, said on Tuesday it would first roll out plant-based nuggets, strips, and bites in Malaysia under its First Pride brand, with a view to expand into other markets.

The Jimmy Dean sausage maker launched its plant-based products late last year from its Raised & Rooted brand in Europe.

(Reporting by Praveen Paramasivam in Bengaluru; Editing by Shinjini Ganguli)

Tyson Foods Expects Costs to Hit Profit as Lifts Revenue Outlook

Higher raw material costs have led U.S. meat producers to raise prices, while demand recovers after an easing of pandemic-led restrictions on dining out.

Overall, Tyson said it expects fiscal 2021 revenue to reach $44 billion to $46 billion. Revenue had previously been forecast at the upper end of a $42 billion to $44 billion range.

Tyson Chief Executive Dean Banks warned, however, that rising costs will pressure profits later this year.

“We’re seeing substantial inflation across our supply chain, which will likely create margin pressure during the back half of the year,” he said.

Tyson said for the second quarter ended April 3, sales rose about 4% to $11.30 billion from a year earlier, exceeding forecasts from analysts, who were on average expecting $11.19 billion, IBES data from Refinitiv showed.

Higher prices helped Tyson’s chicken segment post 4.6% sales growth, while pork rose 16.7%, even as volumes dropped.

In beef, Tyson’s largest business, sales rose 1.7% from a year ago to $4 billion, as prices climbed 7.5% and volumes fell 5.8%. Tyson said it now expects its beef division to post improved fiscal 2021 results compared to last year.

“Commodity beef drove the beat,” Credit Suisse said.

Net income attributable to Tyson increased to $476 million, or $1.30 per share, from $376 million, or $1.03 per share, a year earlier. Excluding items, Tyson earned $1.34 per share, compared with estimates of $1.12.

Shares in Tyson, which are up 22% this year, were around 3% lower following the results.

(Reporting by Praveen Paramasivam in Bengaluru and Tom Polansek in Chicago; Editing by Shounak Dasgupta, Shinjini Ganguli and Alexander Smith)

Three Top Plays for The January Effect

We’re rapidly approaching the start of 2021 and the January Effect, when market players scoop up the prior year’s biggest losers in hopes of high percentage returns. The new crop of hopefuls is smaller than in prior years because many stocks are trading close to 52-week or all-time highs, restricting the available equity pool. It’s also important to do your homework, if interested in this classic trade, because many losers are destined for even lower prices.

U.S. laws require that investors pay capital gains tax when they sell shares for a profit, except in retirement accounts, which gets taxed at the time of distribution. This requirement induces many folks to keep their strongest stocks through December to lower annual tax bills. In turn, these winners often get sold aggressively in January, freeing up capital that can be risked on bottom fishing, value hunting, and all the other reasons that market players buy cheap stocks.

Let’s look at three prime candidates for the January Effect.

Intel

Intel Corp. (INTC) has done just about everything wrong in 2020. Delayed product rollouts and weak management have allowed smaller rivals to pick up critical market share, making the tech icon one of the worst mega-cap performers, with a 16% year-to-date loss compared to the Nasdaq-100’s 40%+ return. Even so, sidelined investors are hoping for a management shake-up and could pick up shares aggressively in 2021.

Tyson Foods

Tyson Foods Inc. (TSN) and many meatpackers ignored the growing pandemic in the first quarter and failed to take precautions to keep their workers safe. The ensuring scandal cost lives, with widespread infections at plants all across the Midwest and South. Supply chains then broke down, raising prices while lowering revenues. The industry is now in recovery mode but the stock is still down more than 24% for the year, making it an ideal January Effect candidate.

Boston Scientific

Boston Scientific Corp. (BSX) has posted weak or negative growth in the last three quarters. In addition, recalls and lawsuits have plagued the company for many years, raising questions about research methodology and quality control. The stock posted an all-time high in December 2019 and fell to a three-year low in March. The subsequent recovery failed in September, yielding a steady downtick that’s now brought the annual loss to a painful 26%.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.