3 Reasons to be Bullish about Food Stocks

It has not been a happy gathering of food companies at the consumer industry conference this week. ConAgra Foods CON, J.M. Smucker SJM, and Mondelez International MDLZ all recently reported dismal results. But not all food stocks are down. Kraft KRFT, which has a huge overseas presence, reported that sales volume rose by 4 percent. And Kraft's success should become more common in the sector. There are three reasons for investors to be long term bulls on the food sector.

There is growth ahead overseas.

One billion new consumers will join the middle class in emerging market nations, according to "Urban world: Cities and the rise of the consuming class," a report from McKinsey & Company, the global consulting firm. That will increase consumer spending in the trillions around the world. A more affluent diet always receives the bulk of increased discretionary spending. While this trillions more in consumer spending will lift all of the stocks in the sector, perhaps companies with a strong international presence, like Kraft, will benefit more.

The companies can get leaner.

Leave it to legendary investor Warren Buffett to improve the sector. His takeover of Heinz has featured much more cost cutting than was thought possible. That will inspire other food companies to reduce spending. From that, profits will rise.

Niche food companies will do better.

As detailed in a previous article on Benzinga, food companies with a niche should prosper.  Entities such as SoupMan SOUP and Hormel HRL cater to unique segments of the market. SoupMan has had 39.40 percent quarterly revenue growth. The appeal of Hormel's  Spam around the world has resulted in tasty results for the shareholders of Spam.  SoupMan feeds the growing demand of the urban class for packaged meals of a high quality in appealing flavors.

In addition to the promising outlook, there are plenty of food stocks of all types.

From blue chips like Kraft Foods to small caps like SoupMan, investors have a wide variety.  For income, Hormel Foods is appealing due to its history of increasing the dividend.  With quarterly revenue growth surging by nearly 40 percent, it is difficult to top SoupMan as a growth stock.  For long term investing, there a variety of tempting stocks in the food industry.