Stock picks to buy, 7 food companies benefiting from COVID: Stifel

  • With President Trump and the First Lady testing positive for COVID-19 and new cases rising week over week, the work-from-home and eat-at-home routine could last longer than many had expected.
  • The packaged-food industry enjoyed an initial boom during the March grocery hoarding phase and has continued to grow at an above-normal rate as the pandemic persists. 
  • After conducting a comprehensive pricing and volume analysis, Stifel analysts handpicked seven food stocks poised to grow their sales and gain market share even as the economy gradually reopens. 
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Just when Americans were getting ready for a coronavirus vaccine and starting to retrieve parts of their pre-pandemic lives, President Donald Trump and First Lady Melania Trump tested positive for COVID-19.

As new cases continue to rise week over week, according to the COVID Tracking Project, the pandemic-induced work-from-home routine could stretch even longer than many had expected. 

During this prolonged phase of COVID lockdown, tech stocks have thrived as the digitalization of the economy accelerates and more Americans embrace online streaming, shopping, and working. 

However, an often-overlooked sector — the packaged food industry — has been enjoying a sustained high growth rate in sales even as the economy gradually reopens. 

“Packaged food volumes are benefiting significantly due to the COVID-19 pandemic which initially instigated heavy pantry loading and is now inducing greater at-home food consumption,” Stifel analysts Christopher R. Growe, Matthew E. Smith, and Bradley J. Coyne wrote in a recent research note. 

“Growth across packaged foods reached into the 70% range during the initial two-weeks of pantry loading back in March and has trended in the high single digits and as high as 10% in recent periods,” they said. “We believe growth will remain well above historical norms as consumers engage in more at-home food consumption and social distancing measures limit away-from-home food options.”

Their volume and pricing analysis for the top food categories suggested a 6.7% sales growth rate for the four weeks ending September 20, according to the note. 

However, not all food companies are being lifted by increased at-home eating and cooking. While brand-name products continue to gain market share and increase prices and volumes, private label food products have not kept up pace with the brands, according to the analysts. 

“We foresee upside to branded price realization in 2020 due to less promotional activity persisting for a longer period of time,” they said. 

As such, the analysts have handpicked seven food stocks which they’ve given the buy ratings, which means they expect “a total return of greater than 10% over the next 12 months with the total return equal to the percentage price change plus dividend yield.”

The stocks, along with their tickers, price targets, and commentary, are listed below. 

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