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One of the silver linings that came out of this otherwise terrible novel coronavirus pandemic is the emphasis on health. Yes, there is the component of people rushing toward hardware stores to stock up on N95 masks. That’s not what I’m talking about. Instead, the bullish narrative for organic food stocks has increased due to their underlying positive health implications.
Further, investors should really consider this sector as it will likely garner more demand beyond the pandemic. First and foremost, millennials represent the largest generation in the U.S. labor force. Say what you want about them regarding their perceived apathy. For businesses, it simply doesn’t make sense to market mass-scale products with baby boomers in mind.
As you know, millennials have particular ways of spending money. Sure, they may not be buying homes at the same rate as older generations. Nevertheless, younger Americans spend on products that matter to them. In this case, millennials aren’t just talking the talk regarding healthier eating. According to a recent survey, they’re willing to pay more money for higher-quality food. This is one of the critical reasons to consider organic food stocks for a long-term portfolio.
Another catalyst that drives the organic market is millennials’ penchant for sustainability. Admittedly, some of the things young people say sound whimsical. But again, they’re putting their money where their mouth is regarding sustainable product spending. Therefore, you should consider companies levered to the burgeoning plant-based protein industry.
Next, it’s a hard concept to swallow given the current social and political atmosphere. Nevertheless, studies indicate that wealthier people tend to exercise more. Logically, this dynamic suggests that affluent folks are more willing to pay for high-quality nutrition. Therefore, despite the troubles of the pandemic, you should consider these organic food stocks to buy.
- Hain Celestial (NASDAQ:HAIN)
- SunOpta (NASDAQ:STKL)
- Kroger (NYSE:KR)
- General Mills (NYSE:GIS)
- Sprouts Farmers Market (NASDAQ:SFM)
- Lifeway (NASDAQ:LWAY)
- Natural Grocers by Vitamin Cottage (NYSE:NGVC)
Organic Food Stocks: Hain Celestial (HAIN)
As one of the leading brands among organic food stocks, you may be consuming Hain Celestial products without even knowing it. At least that’s been my experience. Specifically, my household is a big fan of Celestial’s herbal teas. In addition, the company offers multiple healthy snacks, as well as skincare products that appeal to a wide range of consumers.
Not surprisingly, then, HAIN stock is one of the best performers in the organic market. Currently, shares are up nearly 40% on a year-to-date basis, reflecting strong consumer demand. With the pandemic essentially encouraging a sedentary lifestyle, there’s never been a more important time to consider healthier offerings at the grocery store, bolstering the case for Hain Celestial.
Moreover, HAIN stock is levered to the exciting plant-based meat market through its Yves Veggie Cuisine brand. Its claim to fame is that Yves products feature no artificial colors or flavors and a decades-long track record. As well, Yves burgers have only three to four grams of fat, beating out its plant-based meat rivals.
Headquartered in Brampton, Canada, SunOpta has become one of the hottest organic food stocks of 2020. Likely, this is due to the underlying company’s multiple relevant products. As you know, people on this side of the globe tend to be addicted to food. With our waistlines expanding, it’s proof that education alone isn’t enough to stop this trend.
Therefore, it’s more productive to address the ingredients that go into our foods rather than attempting to stop deeply ingrained behaviors. Fortunately, SunOpta has a range of healthy and organic fruit-based snack offerings which are popular with millennial consumers. Not surprisingly, STKL stock has skyrocketed in 2020, with shares up a whopping 217% YTD.
While a repeat performance to that magnitude is unlikely next year, STKL stock has longer-term catalysts to appreciate. Personally, I believe its alternative milk products, featuring ingredients such as soy, almond, coconut and hemp may lift SunOpta to the next level. Given that approximately 30 million American adults have some form of lactose intolerance, STKL seems a smart pick among organic food stocks.
Organic Food Stocks: Kroger (KR)
When the pandemic first hit us, grocery stores of all kinds experienced a dramatic lift in demand. Some of that has cooled down recently, but the specter of a second wave looms in the background. That’s especially the case with President Donald Trump coming down with Covid-19. And that indirectly augurs well for Kroger and KR stock as the coronavirus has demonstrated that in some ways, it’s unstoppable.
But I also like the grocer as a viable play among organic food stocks. True, as a supermarket giant, Kroger sells all kinds of products. However, most households are interested in healthier food offerings — it’s just that many are struggling to afford them because of this awful crisis. And that’s where Kroger can play a positive role through its Simple Truth plant-based meat.
Personally, I wanted to see what all the buzz was about regarding alternative meats. So, on a grocery trip, I picked up Simple Truth’s ground meat product. I must admit, it was quite tasty, although it also gave a weird aftertaste following my meal. Still, the overall flavor and price point was well balanced, suggesting that KR stock may be a surprising organic wager.
General Mills (GIS)
When you think about organic food stocks, General Mills does not immediately come to mind. Indeed, you might think that GIS stock is the antithesis of organic food investments. This is one of the manufacturers of sugary cereals, which is not exactly great for overall national health. To be fair, General Mills has made a concerted effort to clean up its image in this regard, but the sugary and high-sodium brands remain.
Nevertheless, you don’t want to remove GIS stock from consideration from your organic food portfolio just yet. General Mills has a robust offering of organic and natural options, most notably its Annie’s brand of organic snacks. Also, General Mills owns the Cascadian Farm brand, which incorporates sustainable agricultural practices.
Just as importantly, General Mills has a wide range of accessible food products that most families can afford. Thus, the “hybrid” model of standard and organic offerings may help GIS weather this economic storm, even if we never get a second wave.
Organic Food Stocks: Sprouts Farmers Market (SFM)
As many expected, the grocery industry outperformed during the initial wave of the novel coronavirus. What may have surprised some folks, though, is how premium food retailers like Sprouts Farmers Market performed. While specializing in higher-quality organic foods may appeal to a certain segment of society, Sprouts is also priced higher than your standard grocery store. Despite that obvious pressure, SFM stock has done relatively well.
Moving forward, there might be some questions as to whether Sprouts can maintain its momentum compared to other organic food stocks. After all, the pandemic doesn’t just revolve around a health crisis but an economic one. But the reality is that the coronavirus has been a boon for educated Americans. For example, the unemployment rate in September 2020 for those holding a master’s degree is 3.9%.
Let’s face it — these affluent and educated folks are the types that are going to Sprouts Farmers Market. And that means the fundamental narrative for SFM stock is largely insulated from this pandemic.
Lifeway is really the double-whammy of the organic market. As a manufacturer of healthy beverages and cheese products, Lifeway scores highly among organic food stocks. Indeed, LWAY stock is up 190% YTD, making it one of the most successful plays in this market.
But the other component favoring the company is its emphasis on environmental, social and governance (ESG) concerns. For one thing, Lifeway integrates all-natural ingredients with zero exceptions. In addition, management encourages its partners to promote sustainable agricultural practices and processes with animal welfare in mind. Lifeway also supports many worthy causes and charities, making LWAY stock a feel-good investment.
Most importantly for investors, though, the upside pathway is a credible one. As you know, Lifeway’s most popular product is its kefir beverages, which are cultured milk smoothies that are “high in protein, calcium and vitamin D.”
This plays into the millennial trend of eschewing sugary soft drinks toward healthier fare. Because millennials are willing to pay extra for high-quality food and beverages, I see long-term upside for Lifeway.
Organic Food Stocks: Natural Grocers by Vitamin Cottage (NGVC)
One of the riskier wagers among organic food stocks to buy, Natural Grocers by Vitamin Cottage still offers a compelling argument for speculators. Yes, the economic pressure that’s surely over the horizon may pressure NGVC stock. But with millions of Americans still working from home, money that would have been spent on commuting expenses can now go toward higher-quality foods and beverages.
But will this new normal? In my opinion, there’s a good chance that we could see remote work be the norm until the middle of 2021. According to data from the Centers for Disease Control and Prevention, new daily coronavirus cases are settling at an uncomfortably high threshold. Also, cases have been increasing since Sept. 8.
Here’s the thing — we may avoid a second wave, but to prevent a wider crisis, state governments may restrict movement until the case threshold declines to an acceptable level of risk. That may not happen until mid-2021.
Finally, I like NGVC stock because the underlying health food chain offers high-quality pet food. As you well know, Americans love their four-legged friends. Thus, we could easily see increased spending in this area, boosting NGVC shares.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.