bazilfoto/iStock via Getty Images
bazilfoto/iStock via Getty Images
Thanksgiving, Food, & Stocks
It’s that time of year again when holiday ads and deals make the masses want to know who’s offering the best discounts. When guests come to town, people want to eat. And when it comes to grocery store food prices, I think everyone is looking for a bargain.
% Changes in CPI (BLS Food Index)
% Changes in CPI (BLS Food Index)
According to the Bureau of Labor Statistics, the food index has seen an increase of 10.9% over the past year. According to the CPI, poultry prices are among the highest in the meat category, with Thanksgiving turkeys up 75% to 112%. Egg prices also rose to a third all-time high of $4.18 a dozen, with many retailers selling eggs 200% above the normal $1.45 a dozen. Outbreaks of avian flu and supply chain problems are contributing factors. American Farm Bureau Foundation (AFBF) president Zippy Duvall said: “We are all feeling the pain of higher prices at the grocery store. HPAI outbreaks in the spring and an increase in cases in the fall are taking their toll, but farmers remain committed to ensuring America’s food supply remains strong.” Given unprecedented times, consumers must be able to focus on affordability. But not all discounts are the same. Cheaper does not mean better, and anyone who has read my articles before understands how important the basics are to me when choosing stocks. I don’t want you to get caught by a bear, so my quantitative model identifies stocks that look good – and points out bad – based on collective investment metrics such as valuation, growth, profitability, earnings adjustments, and momentum relative to their peers. Avoid stocks with weak fundamentals, so I’ve rounded up the top three consumer stocks for Thanksgiving.
Best U.S. Food Consumer Staples Stocks
As the Fed raises interest rates to curb inflation, look for companies with strong and consistent sales histories and attractive valuations. Like any investment, there are risks and rewards, and 2022 was full of volatile price fluctuations. However, consumable staples are less volatile than other investments, they are defensive in nature as their products are always in demand, even in times of inflation and economic uncertainty as we see. While people can budget or cut back, most people don’t stop drinking coffee, eating, bathing, or shaving during “harder” times. This is why basic consumer goods represent a great opportunity for investors looking for a more reliable investment with a long-term perspective.
1. Performance Food Group Company (NYSE:PFGC)
Ranking of quantitative sectors (as of November 15): 1 out of 194
Quant industry ranking (as of November 15): 1 out of 7
Despite labor shortages and the impact of the pandemic on the foodservice industry, the third-largest foodservice distributor in the US, Performance Food Group Company (PFGC), is resilient thanks to its subsidiaries. Marketing and distributing groceries across the U.S., its large family of brands, which includes a rich mix of pizzerias, has helped mitigate the effects of the pandemic while allowing the company to return to pre-pandemic sales by April 2021. Low-cost business with strong momentum, organic PFGC growth and attractive margins make these stocks worth considering in portfolios, especially as they gained 9% market share just behind such leaders as Sysco (SYY) and US Foods (NYSE:USFD).
PFGC Valuation & Momentum
Specializing in national chains and independent restaurants (38% of pizzerias), PFGC’s large chain of over 142 distribution centers, over 200,000 products and 125,000 customers has allowed the company to achieve the desired growth while continuing to trade at reduced levels.
PFGC Valuation Grade (Alpha Premium Quest)
PFGC Valuation Grade (Alpha Premium Quest)
With a projected non-GAAP P/E of 15.66x vs. sector median of 18.76x and projected PEG of 0.49x, which is more than 80% of the industry gap, these figures, along with EV/sales , should appeal to long-term, value-oriented futures traders and, hopefully, bargain-seeking investors this time of year.
PFGC is also in an uptrend with investors actively buying shares. The share price shows an upward trend, +24% since the beginning of the year and +23% over the last year. Many analysts believe the stock is overbought, so this could be a good time to start stocks, especially given recent performance.
Performance Food Growth & Profitability
On November 9, 2022, PFGC released its Q1 2023 results, showing top and bottom earnings beating. EPS of $1.08 beat $0.28, and revenue of $14.72 billion was up nearly 42%. With a total case volume increase of 16% and better than expected results from all three business segments: Foodservice, Vistar and Convenience, the solid growth allowed the company to increase sales and confidently revise its EBITDA forecasts.
PFGC Growth Grade (Alpha Premium Seek)
PFGC Growth Grade (Alpha Premium Seek)
PFGC’s strong focus on pizzerias has ensured revenue stability in the uncertain times following the pandemic and the current environment where many competitors have collapsed. PFGC’s diverse products and services enable it to grow and increase its profit margins. Its private label products such as Braveheart, grass-fed beef, and Bay Winds, premium seafood, provide a competitive advantage and differentiation. Speaking about Q1 2023 earnings, Performance Food Group CEO George Holm said:
“Our consolidated results allow us to exceed our original forecasts for fiscal year 2023 and achieve the three-year outlook we presented at Investor Day in June. Our three-year targets are $62 billion to $64 billion in revenue and $1.5 billion to $1.7 billion in adjusted EBITDA in fiscal 2025. The backdrop to our business remains positive… A slight reduction in restaurant traffic has been more than offset by our share growth in the market, continued recovery in Vistar channels and continued growth in our food segment. we are closely monitoring the macroeconomic conditions and the different outlook for 2023. As we emphasized, we feel very comfortable with our position in the market, which is reflected in our overall top and bottom results.”
One of the Performance Food Group’s greatest successes was last year’s $2.5 billion acquisition of Core-Mark, a leading wholesale distributor that collectively contributed to PFGC’s outstanding sales of $50.89 billion in fiscal year 22. PFGC, a company with With strong finances and momentum, making strategic moves for growth and the ability to pass on rising food costs to consumers, it is a defensive game that could outperform the wider market, as does its competitor, US Foods.
2. US Foods Holding Corp. (USFD)
Ranking of quantitative sectors (as of November 15): 22 out of 194
Quant industry ranking (as of November 15): 2 out of 7
The leading food distributor in the United States that works with approximately 300,000 restaurants and food service operators in more than 70 locations, U.S. Foods Holding Corp. (USFD) is on a mission to provide its partners with excellent food solutions and business tools. With a cost advantage amidst inflation allowing it to organically gain market share, the USFD is showing consistent returns and tremendous growth and momentum as evidenced by the factor ratings below.
Searching for ratings Alpha Factor evaluates investment characteristics based on sectors. Presenting an “A” valuation rating, A+ growth and solid profitability, momentum and revision ratings, the USFD is broadly solid compared to the sector. With bullish momentum, the USFD is actively bought, which pushes up its share price.
USFD Refrigerant Grades (Alpha Premium Quest)
USFD Refrigerant Grades (Alpha Premium Quest)
US Foods Valuation & Momentum
Although the USFD is -3.12% YTD, the stock is in an uptrend with attractive valuation ratios. US Foods’ Forward Non-GAAP P/E of 15.83x represents a difference of -15.61% against the sector, and its Forward PEG of 0.22X represents a difference of -91.44% against the sector. In addition to discounted pricing, the USFD’s pricing performance outperformed the quarterly medians of its peers in the sector.
Since Q4 2021 financial results, management has focused on its long-term plan, which includes:
Organic increase in restaurant sales at the level of 1.5 times the market.
Gross margin optimization through pricing and increasing the number of private labels
Improving operational efficiency through cost savings
US Foods 3-Step Plan (US Foods Q4 2021 Investor Presentation)
US Foods 3-Step Plan (US Foods Q4 2021 Investor Presentation)
To date, the company has reduced costs and invested in growth, eliminating over $100 million in fixed costs while raising $1 billion in new business opportunities. As we delve into the growth and profitability of US Foods, the commitment and focus of U.S. Foods on customer service translated into continued success in exceeding revenue forecasts.
US Foods Growth & Profitability
Like PFGC, U.S. Foods has a diversified product portfolio and differentiates itself by offering independent consulting services to restaurants to improve operations and profitability. In addition, it has its own line of private label products, which increases its margins and gives it a competitive advantage, accounting for over 34% of its sales in 2021.
USFD Growth Rate (Alpha Premium Seek)
USFD Growth Rate (Alpha Premium Seek)
Despite a Q3 2022 EPS loss of $0.60 by $0.01, U.S. Foods of $8.92 billion topped $202.33 million, up more than 13% year-on-year. Adjusted EBITDA grew nearly 21% in the third quarter, and to capitalize on the digital market and increase market share, USFD launched MOXē, a next-generation digital e-commerce tool.
“US Foods has been a pioneer and leader in foodservice technology solutions for over a decade,” said Gene Carbonara, US Foods vice president of e-commerce and digital technology for US Foods. “With MOXē, we have taken a major step forward in the evolution of the e-commerce customer experience in terms of efficiency and ease of use. Our new technology offering will continue to set US Foods apart from the competition for years to come as we deliver on our promise to help our customers succeed.”
Given its strong performance and cash flow this year, the company has announced a new $500 million share buyback program that will provide long-term value to shareholders, adding why these shares are among the best to buy, according to Quantitative Ratings.
3. United Natural Foods, Inc. (NYSE:UNFI)
Quantitative sector ranking (as of November 15): 24 out of 194
Quant industry ranking (as of November 15): 3 out of 7
Food distributor United Natural Foods (UNFI) offers food products and general food services in the United States and Canada. Operating in two segments, wholesale and retail, UNFI experienced tremendous growth during and after the pandemic, with Amazon’s (AMZN) Whole Foods as its largest customer.
Our food retail staples are sold at deep discounts and offer upward momentum. The demand for groceries is high, despite astronomical prices. As we see with inflationary price hikes, UNFI can take advantage of this, so why not take advantage of these stocks as well as our other consumer staples?
UNFI Valuation & Momentum
UNFI is rated A-. Since A covers most of UNFI’s underlying valuation rating, the valuation metrics for these stocks look great. Its forward P/E is 9.96x, trading more than 50% lower than the sector, and its forward PEG at 1.18x is -53.13%.
UNFI Valuation Assessment (Alpha Premium Search)
UNFI Valuation Assessment (Alpha Premium Search)
I also emphasize that UNFI has a P/B ratio of 1.33x compared to the industry average of 3.02x. P/B is significant because it measures the stock’s market value relative to book value, and given the numbers above, UNFI is very attractive.
UNFI, like my other picks, also has an incredible momentum. As confirmed by Kroger’s (KR) transaction worth USD 24.6 billion, the industry must have good prospects for the acquisition of Albertsons Companies (ACI). The Kroger-Alberton merger will collectively result in Kroger having nearly 5,000 grocery stores, making it the second largest grocery store behind Walmart (WMT). Despite this news, investors still love food names because they are defensive in nature and offer more recession-proof features. As stated by Goldman Sachs analysts in an SA News article, “while relative valuation levels for basic consumer commodity stocks generally look daunting, food stocks continue to be an attractive valuation for investors. The company is positive about the food sector with prices seeing increases that are larger and more durable than previously thought, which should support margins even after lowering input costs.” UNFI remains bullish, and despite a bumpy road after its acquisition of Supervalu in 2018, which nearly bankrupted the company, the company has made significant gains despite challenges and continues to deliver solid results.
UNFI Growth & Profitability
UNFI has a solid “A” growth rating, with recent earnings reports yielding an EPS of $1.27, which is above $0.01. Despite missing $7.27 billion in revenue by $61.11 million, the company benefited from increased efficiency and growth, new technology and automation investments that helped reduce costs, and partnerships with customers enabled it to grow organically.
In addition to cross-selling activities, since 2020, UNFI has more than doubled its sales, contributing to $1 billion in sales in fiscal year 2022.
UNFI cash flow and balance sheet strategy (UNFI Q4 2022 Investor Presentation)
UNFI cash flow and balance sheet strategy (UNFI Q4 2022 Investor Presentation)
Holidays are approaching, and in difficult economic times it is necessary to carefully assess investment opportunities. UNFI posted record Q4 wholesale growth of $7.3 billion and gross margin improved. While the company is benefiting from strong demand for groceries and reinvesting for future growth, UNFI is focused on reducing leverage and reinvesting for shareholder returns as shown in the chart above. As inflation continues to be a hot topic and we see rapid increases in food prices, companies like UNFI in the food sector can benefit from this. In addition to getting a bargain with the three stocks mentioned in this article, valuable stocks should be part of your portfolio as they are a great way to diversify and PFGC, USFD and UNFI are also attractive for growth and EPS. Any of my food supplies should give you something to chew on.
Feast Your Eyes On My Top 3 Food Stocks To Take A Bite Out Inflation
Identifying stocks in the right sector is essential for investors who want to consider the best stocks to buy for future returns. Fear and market volatility have created buying opportunities, so it’s important to stay vigilant and look for investments that can thrive in a high-interest environment. The “Christmas Rally” could be an opportunity to buy these stocks during a seasonal downturn as investors temporarily switch to upside stocks.
This year, people are looking for discounts – at a good price. All three stocks of UNFI, UFD and PFGC that I have chosen are very attractive in terms of value and growth, and offer great momentum. This Thanksgiving, consider my food supplies, which are established but underrated companies with high factor ratings, and are some of the most important consumables people want for the holidays.
Head of Quantitative Strategies at Seeking Alpha. Data analysis and interpretation has been at the heart of my career. For my purposes, data interpretation is the process of making sense of statistics that have been collected, analyzed and evaluated. This skill set has served as a solid foundation for identifying trends and making clear forecasts when managing money. It has also allowed me to develop user-friendly online tools that provide individuals with indicators and signals to interpret the strength or weakness of a company’s values at a glance. Importantly, this knowledge has helped me build Wall Street trading offices, launch international hedge funds, and build a SaaS FinTech investment research firm. Prior to my role at Seeking Alpha as Head of Quantitative Strategies, I founded a hedge fund and asset management company (Cress Capital Management), was the head of international business development at Northern Trust and spent most of my professional career at Morgan Stanley with its own trading office.
Disclosure: I/We do not hold any stocks, options or similar derivative positions in any of the listed companies and we do not plan to initiate any such positions in the next 72 hours. This article was written by myself and expresses my own opinions. I am not being compensated for this. I have no business relationship with any of the companies listed in this article.
The stock market is not just a get-rich-quick scheme; it can be a way to build lasting wealth. However, you can lose (instead of gain) wealth in the stock market. Having a strategy and investing in the right securities at the right time is essential.
What is the fastest growing stock in 2022?
| Company Name & amp; Symbol | Revenue growth (last quarter vs. same quarter last year) | Price performance (this year) |
|---|---|---|
| Enphase Energy Inc. (ENPH) | 80.56% | 67.81% |
| Clearfield Inc. (CLFD) | 83.94% | 43.89% |
| Palomar Holdings Inc. (PLMR) | 38.02% | 37.35% |
| UFP Technologies Inc. (UPPT) | 86.25% | 33.58% |
Which stocks will rise in 2022? The best stocks to invest in 2022
- Reliance Industries.
- Tata consulting services.
- HDFC bank.
- Infosys.
Can you get-rich-quick off stocks?
Like most other money-making strategies, stocks are more of a get-rich-slow process than get-rich-quick. If you invest $10,000 today at 10% interest, you will have $11,000 in a year. But if you invest $10,000 a year at 10% for the next 20 years, you’ll have $603,000.
How long does it take to get rich on stocks? If you play sectors and pick the right one, it can take nine years to reach a million bucks. What about holding the S&P 500? Thanks to this you will reach a million, but you have to be patient. If you’re a typical buy-and-hold S&P 500 investor, it took almost 12 years to wait.
Can you get rich overnight in stocks? This almost certainly wouldn’t happen overnight… or even for many years. This leads to the second point: you won’t become a millionaire overnight. In 2021 – a great year for exchanges – the stock market gained 18.7%. Consider that it took over a year.
What should I invest in next in 2022?
In 2022, among the key market sectors to watch are oil, gold, cars, services and housing. Other key areas of concern include tapering, interest rates, inflation, payment for order flow (PFOF) and antitrust laws.
What asset class will do well in 2022? So it may seem strange that cash was named the most profitable asset class in 2022, ahead of stocks, bonds, cryptocurrencies, NFTs and real estate.
Is it worth buying 1 stock?
While buying a single share is not advisable, if a trader would like to buy a single share, they should try placing a limit order for a better chance of capital gains that will offset the brokerage fees.
How many shares should I buy from the stock? Instead, focus on the dollar value you want to invest in the company. For example, if you want to buy $3,000 worth of Apple stock, divide that by the recent price of around $264 per share. You will arrive at 11.4, so you will buy 11 or 12 shares.
Can you earn on 1 share? Can one share make you rich? Getting rich off one stock is certainly possible, but getting rich with just one stock is far less likely. It’s not impossible, but you have to consider the percentage returns that would be necessary to get rich on such a small investment.
Is it better to buy one stock or multiple?
Owning more stocks provides a more diversified portfolio of stocks, but holding too many stocks is impractical. The goal is to achieve diversification while understanding exactly why you are investing in each of the stocks in your portfolio.
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bottom line. Assuming you choose a credible company, it’s worth investing in one share. Your money will grow more in the stock market than in a savings account, and you can enjoy stock splits, dividends, and other events that will effortlessly increase your wealth.
Can you earn by buying 1 share? Is it worth buying one share? Absolutely. In fact, with the advent of commission-free stock trading, buying a single stock is quite feasible. Several times in recent months, I have purchased a single share to add to a position just because I had a small amount of cash in my brokerage account.
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