For long term investors, food stocks such as Kraft Foods (NASDAQ: KRFT), Kellogg (NYSE: K), Hershey (NYSE: HSY), Campbell Soup (NYSE: CPB), and The Original SoupMan (OTC: SOUP) are very tasting. Many have done well in recent market action, such as Kraft Foods (chart below).
Food stocks are inherently stable.
There is much to be said about that for a portfolio. Investors should want a foundation of defensive stocks. The allure of food stocks is basic: people will always have to eat.
For growth and value, small cap food stocks like The Original SoupMan are the most tempting.
While great companies, Kraft Foods, Campbell Soups, Kellog, and the others will just not grow that much. By contrast, The Original SoupMan has quarterly revenue growth of over 20 percent. That makes it attractive to both growth and value investors.\
For income investors, food stocks are as solid as those from Big Oil, Big Chemical, and Big Pharma, as detailed in previous articles on this site.
Kraft, Kellog, Hershey, Campbell Soup and others deliver a steady flow of dividend income. For most food stocks, the dividend yield is above the average for the Standard & Poors’ 500 Index (NYSE: SPY). In addition, there is a history of increasing the dividend amount. The average dividend growth rate for the food sector is over 10 percent. That means that shareholders get a double digit raise each year just for owning the stock. Increases of that amount mean that the dividend amount doubles in size about every seven years.
The great thing about food stocks is that investors can see how well the product is doing by visiting the grocery store.
Legendary investors from Warren Buffett to Peter Lynch have extolled the virtues of investing in what is known best. For all, that is food. So if the products of Kraft Foods, The Original SoupMan, Kellog, or another food company is selling well, investors know the stock is a solid buy.