One of the most reliable sectors of the stock market is goods involved in food and water production. These are relatively defensive stocks, as people will always need both, thus guaranteeing them a fairly steady stream of revenue that is largely recession-proof. Indeed, this market continues to grow and expand.
Within the food and drink basket of stocks, some goods tend to perform very well. One such example? Chocolate. Indeed, there are a variety of chocolate stocks and ETFs that are typically high-performing. Here is a list of five great stocks and three ETFs that could provide a sweet boost to your portfolio.
Hershey (HSY)
Company Summary: Hershey is one of the leaders in the chocolate and candy industry. It is the owner of one of the largest and most well-known candy brands in the country and sells multiple, highly popular candies. This includes Hershey’s Milk Chocolate, Hershey’s Kisses, Twizzlers, Jolly Ranchers, and much more.
The stock trend for the past year: Up 30%
Reasons to buy:
- Strong inter-industry performance: The candy industry is performing better than the NYSE average, and Hershey’s is outperforming the confectionery industry in general. Its strong year-to-date performance is largely driven by its above-average profit margins.
- Strong fundamental performance: While Hershey has not seen an increase in every fundamental, many of its key metrics have improved. This includes revenue and net change in cash, both of which saw increases compared to the same time last year.
- High brand recognition: Hershey’s is one of the best-known chocolate and candy companies in the entire country – if not the entire world. This strong brand position makes them an excellent investment for likely future growth.
- Solid dividend: Hershey’s offers a dividend of 1.85%, or $.90 a share. This dividend is a nice bonus to purchasing a growing stock.
Berkshire Hathaway (BRK.A)
Company Summary: Berkshire Hathaway is a holdings company that was founded and run by American financial mogul Warren Buffett.
It owns stock in some of America’s best companies and is known for its long-term financial success. It is on this list because it owns See’s Candies. See Candies was founded 101 years ago and sell a wide array of candies, including boxed chocolates and other gifts.
The stock trend for the past year: Up 32.84%
Reasons to buy:
- Historical performance: Berkshire Hathaway is legendary within the investing world and managed by Warren Buffett, one of the best-known stock and financial gurus in the entire country. It continues to perform extremely well on the basis of all of its holdings – including that of See’s Candies.
- Diversified portfolio: Berkshire Hathaway offers investors the opportunity to purchase stock in a variety of high-performing industries, including Bank of America, Coca-Cola, Apple, and more. The company has typically outperformed the entire market, and investing in Berkshire Hathaway for the purpose of also investing in See’s Candies gives investors access to some of the biggest stocks available on the market today.
Nestle (NSRGY)
Company Summary: Located in Switzerland, Nestle is a multinational food and drink conglomerate. It has a presence on six continents and is involved in a huge array of brands that feed the world.
The stock trend for the past year: Up 9.57%
Reasons to buy:
- Diversified operations: Unlike other companies, Nestle is involved in more than just candy production. It operates dozens of brands, including for other foods, drinks, pet food, and more. This gives individuals who are interested in investing in their stock on the basis of chocolate a chance to diversify the number of holdings that they have.
- Strong fundamental performance: Compared to the same time last year, Nestle is doing better across a wide variety of fundamentals. This includes revenue, net income, diluted EPS, and net change in cash. These improved fundamentals should leave Nestle in a relatively strong position for future and continued success.
- Positive analysis ratings: A current review of 25 analyses by the Wall Street Journal shows that 13 rate Nestle as buy, four rate it as overweight, while only one rate it to be sold. The consensus leans much greater towards buy, with a majority of those surveyed finding it should be bought or will outperform the rest of the industry.
Mondelez International (MDLZ)
Company Summary: Mondelez is a snack-food company that sells a wide array of snacks to over 150 countries. It is the holding company for a huge array of brands, including crackers, chocolate, gum, cough drops, and more.
Like many snack food companies, it is roughly a century old and has expanded solidly throughout its entire history. Its expansion efforts have included attempts to take over some of the largest food and chocolate brands in the world, including Cadbury.
The stock trend for the past year: Up 16.46%
Reasons to buy:
- Positive market trends: Mondelez has benefitted from extremely positive market trends as a result of the ongoing pandemic. These trends – which have resulted in additional eating in the home – have given companies like Mondelez opportunities to gain business. They have done so by expanding their overall food portfolio.
- Improving fundamentals: More than almost any other pure food company on this list, Mondelez has seen a major improvement in its overall fundamentals. This includes its revenue, net income, diluted EPS, net profit margin, and more.
- Positive analysis ratings: Like other snack food and chocolate companies, Mondelez has rated extremely well, even in an industry that does well. A Wall Street Journal review of 23 analyses shows that 17 rate the company as a buy, one as overweight, four as a hold, and one as a sell. The consensus here is clear that the stock is worth buying.
- Dividend: Mondelez has a healthy 2.09% dividend yield in addition to its upside on growth.
Lindt & Sprungli (LDSVF)
Company Summary: Lindt & Springli is an upscale chocolate holdings company. It manages multiple brands, including Lindt, Ghiradelli, Russel Stover, and more.
Over 2,500 products are sold by Lindt & Sprungli. These upper-scale brands are sold throughout the world and have done particularly well in the United States.
The stock trend for the past year: Up 24.14%
Reasons to buy:
- Strong sales growth: According to their annual sales report, Lindt & Sprungli has shown double-digit sales growth, with gross increasing across all brands and in all marketplaces. These sales numbers have been helped by the pandemic, which has shifted much of the food buying habits to at-home consumption. Lindt’s brands are well-suited to take advantage of these trends and have done so.
- Improving fundamentals: The fundamental improvement to all of Lindt & Sprungli’s figures was massive. Revenue, net income, EPS, profit margin, cash on hand, and more all showed major improvements, in some cases improving by two or three digits.
3 Top Chocolate ETFs
An ETF – also known as Exchange-Traded Fund – is a “basket” of stocks. By buying an ETF, you can gain access to a series of stocks rather than spreading the money around on your own.
These stocks are typically oriented around some common factor, like an industry, location, size, or more. Buying an ETF can diversify your overall portfolio and still give you access to multiple stocks.
iPath DJ-UBS Cocoa SubIndex Total Return (NIB)
Fund Summary: NIB is an ETF managed by Barclay’s. It tracks with coca futures, meaning that it will purchase these futures for 2-3 months. As such, this fund is a good way to purchase shares in a fund that will roughly track with the rise and fall of coca.
The ETF trend for the past year: Down 5.89%
Reasons to buy:
- Solid fundamentals: Don’t let the one-year trend fool you – this stock is well-positioned to make major positive movements. The weighted averages of its component pieces all increased over the past year. This includes revenue, net income, EPS, net profit margin, and operating income. Given these solid fundamentals, it stands to reason that the fund is likely to improve in the near future.
- Average expense ratio: The expense ratio for this ETN is 0.7%. This is relatively low and roughly where you would expect an actively managed fund to have its ratio. It speaks well of the overall management structure of this particular fund.
First Trust NASDAQ Food and Beverage ETF (FTXG)
Fund Summary: This fund is a mixture of food and beverage companies that are sold in grocery stores and restaurants across the world. It holds roughly thirty different stocks.
Among its largest holdings are Tyson Foods, J.M. Smucker, Archer-Daniels-Midland, Bunge, Pepsi-Cola, and more.
These holdings are subject to change, as the funds stated goal is to stay as close as possible to the Nasdaq US Smart Food & Drink index. As such, buying this fund can largely be seen as a proxy attempt to stick with this particular index.
The stock trend for the past year: Up 5.13%
Reasons to buy:
- Mirrors positive trending industry: As noted above, purchasing this fund will allow a buyer to stay relatively closely aligned with the food & drink industry as a whole. This can be done at a relatively low expense ratio of 0.6%.
- Stable price: Investors looking to invest in this segment of the economy but limit their exposure to volatility are in luck. This fund lacks the volatility commonly seen in other similarly situated funds, thus allowing investors to purchase a fund in the food & drink industry without as much concern over its future.
Powershares Dynamic Food & Beverage (PBJ)
Fund Summary: PBJ is another ETF that is comprised of 30 food and drink companies that are located within the United States. The fund seeks to stick as close as possible to the performance of the Dynamic Food & Beverage Intellidex and keeps 90% of its assets in stocks that are in that index.
The stock trend for the past year: Up 13.21%
Reasons to buy:
- Alternative tracking with food & beverage industry: Like the FTXB, the PBJ tracks with a popular food & beverage industry metric. Investors who want to invest in this market are well-suited to invest in the PBJ.
- Low expense ratio: The expense ratio for this fund is a mere .63%, which is in line with where a fund of this size should be.
- Solid fundamentals: Other analyses of this fund have found that it performs well across a variety of important ETF metrics. This includes its overall value, momentum, yield, and more.
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