Profits in the Food Aisles: 6 Stocks Investors Should Know About

Grocery stores and food staples may not be the sexiest investment topics. But at a time of political, economic and pandemic anxiety, the relatively safe and stable food sector might be a comforting option for investors to consider. Here are some food favorites from leading investment experts and contributors to MoneyShow.com. John Dobosz, Forbes Dividend Investor Stocks chosen for our portfolio are rewarded for superior rates of dividend growth and revenue growth, as well as for high yields and low payout ratios. Operating cash flow over the past 12 months must be positive, and sufficient to cover the dividend. They also trade at discounts to multiple five-year average valuation measures that include price to sales (P/S), price to book value (P/BV), price to current year expected earnings (P/E), price to cash flow per share (P/CF), and enterprise value/EBITDA. Here are three new additions in the food and grocery sector. Parsippany, N.J.-based B&G Foods is a holding company that manufactures, sells, and distributes shelf-stable frozen food, and household products in the U.S., Canada, and Puerto Rico. Its products include frozen and canned vegetables, hot cereals, fruit spreads, canned meats and beans, bagel chips, spices, seasonings, hot sauces, and wine vinegar. Its brands include Back to Nature, Bear Creek, Cream of Wheat, Green Giant, Mrs. Dash, and Ortega. Revenue this year is expected to grow 15.7% to $1.92 billion, with earnings up 33.5% to $2.19 per share, giving the stock a recent forward P/E ratio of 12.4, 17% below its five-year average P/E of 14.9. The next earnings report is in early November. The stock has pulled back recently following a furious run higher since March, and it maintains a bullish trend. Pittsburgh, Pa.-based Kraft Heinz makes and markets food and beverage products that include condiments and sauces, cheese and dairy, and complete meals. In its last earnings report on July 30, the company reported second-quarter earnings that topped analysts' forecasts, as pandemic-fueled buying buoyed profits. Earlier this month, it announced plans to cut $2 billion of costs and to focus on its premier brands. Warren Buffett's Berkshire Hathaway is a big shareholder. Revenue this year is expected to grow 3% to $25.74 billion, with earnings down 6.6% to $2.66 per share, giving the stock a recent price-earnings ratio of 10.9. The average P/E over the past five years has been 17.8. The stock also trades 50% below both its five-year average price-sales and price-to-book value multiples. With a debt-to-equity ratio of 0.58, Kraft Heinz is much less leveraged than many of its food peers like Campbell Soup , which sports a debt-to-equity ratio of 2.4. Kraft Heinz pays a quarterly dividend of $0.40 per share, giving the stock a rich dividend yield of 5.1%. Free cash flow per share of $3.15 is nearly double the $1.60 in annual dividends. Technically, the stock is oversold and the MACD is turning positive. Springfield, N.J.-based Village Super Market operates a chain of 30 supermarkets under the ShopRite name in New Jersey, Maryland, New York City and eastern Pennsylvania, and three specialty markets under the Gourmet Garage name in New York City. The company is a member of Wakefern Food Corporation, the largest retailer-owned food cooperative in the U.S., and owner of the ShopRite name. Revenue for Village Super Market over the past 12 months surged 15.9% year-over-year to $1.72 billion, with earnings jumping 126.5% VLGEA trades for around 15.4 times earnings, below its five-year average of 16.1, despite the sizable growth in earnings. Trading at book value, the stock is also at a discount to its five-year average price-to-book value ratio of 1.3. times sales. Village Super Market is a small-cap stock with a market capitalization of $350 million, but long-term debt of $6.89 million is less than 2% of market cap. Operating cash flow over the past 12 months of $5.36 per share is more than five times annual dividends of $1.00 per share. John Buckingham, The Prudent Speculator J.M Smucker manufactures and markets food products. While the company is best known for fruit spread, the company also produces peanut butter, canned milk, baking ingredients, juices and just about everything in between. Smucker benefited greatly from the pandemic-related pantry-stock-up frenzy, but management remains on track with its consumer-centric growth strategy, while endeavoring to remain agile to keep up recent momentum to deliver on financial commitments. As consumers spend more time away from the center aisles at the grocery store, we appreciate efforts to add healthier foods to the company's brand portfolio (through both new and reformulated items). We also like the company's diversification via pet food offerings, while specialty coffee, Uncrustables and pantry products continue to post strong growth numbers. We think the recent P/E multiple of 14, compared to 5- and 10-year averages of 19, offers an attractive entry point for patient investors to add a strong stable of consumer staples brands to their portfolios, while garnering a just-increased dividend with the yield now 3.1%. Gavin Graham, Internet Wealth Builder Nova Scotia-based Empire Company Limited (Toronto: EMP.A) is the parent company of the Sobeys and Safeway supermarket chains. It also owns the IGA, FreshCo, Thrifty, Farm Boy, and Lawton's Drug Stores chains. It also owns 41.5% of the Crombie REIT , which in turn owns many of its supermarket locations. Overall, it owns 1,500 stores and 350 retail gas stations in 10 provinces and employs 125,000 people. Empire has performed strongly as a major beneficiary of the pandemic, as well as reflecting the success of the turnaround effort, named Project Sunrise, implemented in 2017. The company has since launched Project Horizon, a three-year program to increase EBITDA by $500 million and gross margin by 100 basis points. Some 22 of the 65 locations for the FreshCo rollout in western Canada have been converted, with eight in development. The Voila by Sobeys e-commerce food delivery service went live in the Toronto area. Empire launched a new national campaign for its Compliments brand label. Sales for the first quarter of Empire's financial year, ended Aug. 1, saw Same Store Sales Growth (SSSG) from stores open at least twelve months increase 8.6%. Excluding lower fuel sales due to lower driving during the pandemic, the gain was a remarkable 11%. The company's debt was upgraded to investment grade. The dividend was increased from $0.12 a quarter to $0.13 ($0.52 a year), the twelfth consecutive year it has been increased. The yield is 1.35%. Empire has successfully turned itself around and is benefiting from the switch to fewer, but larger grocery stores due to the pandemic as well as the roll-out of its Farm Boy and FreshCo brands and the Voila initiative, which will launch in Montreal next spring. The stock remains a Buy. Taesik Yoon, Forbes Investor While Covid-19 has wreaked economic and financial havoc on many businesses, it has actually bolstered the fortunes of some -- such as our latest recommendation, Sprouts Farmers Markets, Inc. . Among the biggest beneficiaries are food retailers like Sprouts Farmers Market, an operator of health-centric and organically focused grocery stores in the U.S. The company has seen such a huge demand surge from the sharp rise in at-home food consumption due to the pandemic that earnings over just the first six months of the year have already exceeded what the company had initially hoped to achieve for all of 2020. SFM operates more than 350 grocery stores in 23 states from coast to coast, which specialize in providing affordable, fresh, natural and organic products that promote healthy living for its shoppers. True to its farmers market heritage, the company is known for pioneering its unique grocery model that offers a welcoming store layout featuring fresh produce at the center of the store surrounded by a complete selection of groceries, an expansive bulk foods section and a vitamin department focused on overall wellness. Its stores also stock a unique assortment of healthier products with special attributes -- such as plant-based, gluten-free, keto-friendly and grass-fed -- to meet the growing and diverse needs of today's consumer. While most companies have struggled to cope with the economic fallout from the pandemic, the opposite has been true for Spouts. Indeed, spurred by Americans stocking up on food and other essentials ahead of the mandatory stay-at-home orders issued by numerous states to slow the spread of the contagion, its stores saw a huge spike in demand early on. Further supported by the rise in the number of meals being consumed at home, restaurant closures and the decision by many companies to allow their employees to work from home as a result of the lockdowns, the firm's comparable store sales climbed 9.9% year over year in the first half of 2020. This also led to an 81.6% jump in adjusted earnings over this span to $1.38 per share, which eclipsed the $1.17-1.23 per share originally forecasted for all of 2020. Yet while there's no denying 2020 represents an unusually strong year that will be tough to repeat, we believe the more lasting impact from some of the key factors driving this exceptional growth is likely to continue contributing to better-than-expected operating results in the periods ahead. Thus, we view the recent selloff in the shares as shortsighted and think they'll soon be back on the rise.

Profits in the Food Aisles: 6 Stocks Investors Should Know About

The safe and stable food sector is a comforting option for investors to consider now.

Columnist Conversation

The ARKK Will Not Sink as Our LT Bounce Zone Is...

For the First Time in Months...

$8.2 Million Insider Sale in Estee Lauder (EL)

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.