Hibernation season is upon us. This is the time of the year when people sleep in late, eat more junk food than they should, and pack on the pounds. Though such gluttony is certainly harmful in terms of health, overeating during the holiday season has the potential to benefit your portfolio.
Seize the opportunity to invest in food stocks across the next couple of months, and you might make a tidy profit. However, certain food stocks are better positioned for a bull run than others this holiday season.
Let’s take a quick look at three food stocks that may be worthy of a position in your portfolio: General Mills (GIS), The Hershey Company (HSY), and Hostess Brands (TWNK).
General Mills (GIS)
Take a look at the labels on the food you buy, and there is a good chance you will find GIS is the maker of some of your favorite treats and other tasty delights. GIS makes food ranging from cereal to snacks, convenient meals, yogurt, frozen dough, and baking mixes. It is also important to note Blue Buffalo pet food is fully owned by GIS.
The POWR Ratings show GIS has an “A’ grade in the Trade Grade component along with “B” grades in the Industry Rank, Peer Grade, and Buy & Hold Grade components. GIS is ranked #3 out of nearly 60 Food Makers stocks. Analysts are bullish on GIS, setting an average price target of $65.13, which could mean a potential upside of 8%.
GIS might also be undervalued at its current trading price as its forward P/E ratio is a mere 16.68. GIS moved up to $65 this past summer. Investors took profits by the time autumn came around, sending the stock down toward $58. However, GIS is back above $60 as we transition to the holiday period.
GIS sales are up 10% compared to the year prior. Adjusted earnings are up 27% on a year-over-year basis. Furthermore, GIS has a dividend of 3.39%. The bottom line is that GIS is a value stock somewhat resistant to recessions, meaning it should hold steady even if the economy falters in the months ahead.
The Hershey Company (HSY)
HSY has been in business since the late 19th century. The company makes popular candy and also owns and operates its own theme park in Hershey, Pennsylvania. Additional HSY offerings include beverages, baking ingredients, mint refreshments, gum, mixes, snack bites, spreads, and toppings.
The POWR Ratings show HSY has an “A” grade in the Peer Grade, Buy & Hold Grade, and Trade Grade components. The stock is ranked third out of nearly 60 in the Food Makers industry. The average analyst price target for the stock is $160, indicating a potential 10% upside.
HSY’s organic third-quarter sales are up nearly 4% on a quarterly basis. Demand for HSY products is rebounding, margins are higher, and people are gravitating towards junk food during the pandemic. Though HSY has not made it back to its pre-virus price of $161, the stock is nearly there.
Hostess Brands (TWNK)
TWNK develops, makes, markets, sells, and distributes sweet treats. Most TWNK products are sold in the United States. Open your cupboard, check out the small print on the boxes, and you are likely to find at least one TWNK product. TWNK is a POWR Ratings stud with “A” grades in the Peer Grade and Trade Grade components along with “B” grades in the Industry Rank and Buy & Hold Grade components. TWNK is ranked in the top 10 out of nearly 60 Food Makers stocks.
Analysts are bullish on TWNK, setting an average price target of $15, meaning a potential 11% upside. TWNK has a reasonable forward P/E ratio of 18.13, indicating the stock might be underpriced at $13.55. Part of the bullish outlook for TWNK stems from its acquisition of Voortman, giving the company the inside track in the sugar-free market.
Furthermore, TWNK received a bullish endorsement from a respected investment analyst, setting the stage for a possible bull run into the holidays.
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GIS shares fell $0.03 (-0.05%) in premarket trading Wednesday. Year-to-date, GIS has gained 17.85%, versus a 15.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…
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