Investors should stay selective on packaged food stocks - KeyBanc

Despite lagging the S&P 500, food stocks had a strong year in 2013. We believe investors should remain selective in their allocation of capital by placing a greater emphasis on stock picking.

Overall, in terms of themes for our packaged food/beverage coverage universe in 2014, we expect sluggish but gradually improving food volume trends, increased promotional intensity (funded by easing commodity costs and retailers fighting for traffic share) and a relatively active M&A environment.

Accordingly, we prefer companies with solid organic growth prospects [Green Mountain Coffee Roasters (GMCR); Amira Nature Foods (ANFI); J & J Snack Foods Corp. (JJSF)], exposure to declining commodity costs [GMCR; Hormel Foods (HRL); The J.M. Smucker Company (SJM); Flowers Foods, Inc. (FLO)], exposure to company specific margin enhancing opportunities [FLO; GMCR, ConAgra Foods (CAG)] and ability to benefit from accretive M&A (SJM, JJSF and CAG).

On the non-branded part of our coverage universe, Ingredion (INGR) is our top pick followed by Tyson Foods (TSN) and Dean Foods (DF).

From other sites
Comments (2)
  • 50 cent it is
    , contributor
    Comments (1453) | Send Message
    I agree
    Think food companies have had a good run but in for sluggish growth except for reinvented companies like Post
    7 Jan 2014, 01:05 PM Reply Like
  • SSnape
    , contributor
    Comments (620) | Send Message
    I recently read an article focusing on the slowly growing,(but DEFINATELY growing), demand for store brand,"private lablel" foods. Since its' acquisition of RAH, CAG is now the largest producer of these brands in the U.S.In addition, CAG has its' own pre-exsisting arsenal of brands such as Hunts. Growth may be slow, but I believe it is definately going to be lasting because the economy is never again going to be the same as it was pre 2008.


    Long: CAG.
    7 Jan 2014, 03:54 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs