How to Beat Inflation with Stock Investments: Buy What You Know and Eat What You Eat

New York
CNN Business

The stock market is a mess right now, but here’s some Wall Street wisdom for these tough times: Eat, drink, and be merry. Emphasize the cheerful if you have purchased food and drink stocks.

Heavy consumer staples like food and beverage manufacturers tend to do well even during tough economic times and market turmoil. Indeed, even if people reduce their discretionary spending like going to restaurants or subscribing to streaming videos, they still have to eat and it’s cheaper to do it at home.

Investors are therefore betting on food and drink makers at a time of high inflation and economic angst – and that was very clear on Monday, with several food stocks rising even as the broader market slumped. again.

Shares of Campbell Soup (CPB), ConAgra (CAG), Kellogg (K), General Mills (GIS), Kraft Heinz (KHC), Smucker (SJM), Tyson Foods (TSN) and spice maker McCormick (MKC ) won on Monday . All of these stocks are also in the green for the year. Meanwhile, Coca-Cola (KO) and Hershey (HSY) are also posting solid gains and both stocks are not far from record highs.

It’s not just the necessity factor: inflation also improves the fortunes and prospects of many food businesses. Tyson Foods, for example, reported better-than-expected earnings and sales and a healthy outlook on Monday, in part due to higher retail prices for beef and chicken.

Tyson’s chief financial officer, Stewart Glendinning, said on a conference call with analysts that so far, “consumer demand has remained sustainable even as we have worked to manage inflation through increases prices” and that “category relevance has enabled continued strong demand” even as prices have fallen. at the top. In other words: people still eat animal protein and they are willing to pay for it.

Coca-Cola, Kellogg and Kraft Heinz have also posted strong profits in recent weeks.

According to data from FactSet Research, the consumer staples sector had the highest percentage of companies reporting first-quarter results that beat forecasts, led by big gains from frozen french fries maker Lamb Weston. (LW), Molson Coors (TAP) and agricultural products and flavors giant Archer-Daniels-Midland (ADM).

Another factor that makes these stocks attractive to investors is that many food and beverage companies pay regular dividends with relatively high yields. It also makes it a potential option for conservative investors, even as long-term bond yields have soared on inflation fears.

Kellogg has a dividend yielding 3.2%, roughly in line with the rate on 10-year Treasury bills. Coke and rival Pepsi (PEP) also have dividends yielding nearly 3%, as well as Oreo maker Mondelez (MDLZ).

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