Food stocks on the menu for Thanksgiving week
By Rodrigo Campos
NEW YORK (Reuters) - There are no picky eaters on Thanksgiving - as long as the menu is hormone and antibiotic free, locally grown and convenient.
That is the reality for major food producers, including companies reporting earnings next week, as they adapt to a more health-conscious consumer.
Tyson Foods and Post Holdings report results Monday, followed Tuesday by Campbell Soup and Hormel Foods . They are beating the S&P 500 by different margins, but that is not the case for all the industry.
Spending on food is shifting due to better-informed and increasingly health-conscious consumers. Savvy investors are taking note.
""We are looking at changing consumer patterns with regards to looking at the label," billionaire value investor Mario Gabelli told Reuters reporters during the Reuters Global Investment Summit in New York.
He mentioned yogurt and probiotics - not exactly Thanksgiving staples, but buzz words among health-minded consumers. Gabelli's investing ideas include General Mills , Paris-based Danone and Tokyo-based Yakult Honsha <2267.T> for their yogurt products, and probiotics maker Chr Hansen , from Denmark.
Gabelli is not alone in looking for value in the trend. Earlier this week, Target Chief Executive Brian Cornell singled out yogurt as a key category "where we added premium and better-for-you brands."
SHIFTING GROUNDS
Tyson Foods, likely the provider of many a turkey at the table next week, said in April it plans to end the use of human antibiotics in its chicken by 2017, while Hormel announced in May the acquisition of natural and organic meat processor Applegate Farms.
Investors will likely sift through their earnings next week to see how the process of catering to a new type of customer is affecting the business.
Hormel's stock, up 31 percent year to date, has gained more than 20 percent since the Applegate announcement. It hit an intraday record high on Friday before closing the day down 1 percent.
Tyson shares are up almost 9 percent this year, while the food producers index <.5SP302020> is up more than 5 percent. The S&P 500 <.SPX> has gained 1.5 percent in 2015 so far.
Not all investors, however, are seeing enough of what they are looking for in the food business when it comes to catering to millennials and healthy eaters.
"I look at food companies hoping to find the buzzwords I think the millennials are looking for (but) they're not offering fresh, artisanal, that kind of stuff," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
She said lack of time is key and convenient foods are a fact of life for many people. "I think some company that cracks that, the prepared foods for the next generation, that would be a real winner."
NEXT WEEK'S EARNINGS
One of the shifts in consumption is gearing more toward protein, where Tyson and - on a smaller scale - Hormel, dominate.
"It is part of the healthier eating, diets are shifting to more protein, less carbohydrates," said Timothy Ramey, analyst at Pivotal Research Group in New York.
Of course it's not all about the food when it comes to investor interest. If it announces an increase in its dividend for next year, Hormel will join a select club of companies that have upped dividends for 50 straight years.
U.S. markets will be closed Thursday for the Thanksgiving holiday and Friday will be a half-session day.
(Additional reporting by Ross Kerber and Jonathan Stempel; Editing by Dan Grebler)
