“Climate is changing. Food and agriculture must too.”
This is the theme of the Food and Agriculture Organization of the United Nations (FAO) for this year’s World Food Day, (WFD). The theme revolves around the fact that the global climate is undergoing a drastic change, which is heavily affecting food and agriculture production. On the other hand, population is also growing steadily, which means a gradual rise in food demand.
This is why it is important to adopt effective steps to boost food and agriculture production by a significant extent in order to meet rising demand despite the effects of climate change. Most countries are coming forward to explore different ways to make food production and agriculture more sustainable in order to exterminate hunger completely from the entire world.
Objectives of WFD
Since the time it was first observed in 1979, WFD is celebrated every year on October 16, the day on which the FAO was created with the aim to eradicate global hunger. Millions of people from across the world celebrate this day by participating in several events that are organized to promote awareness about different issues, including food wastage and lack of preservation of water for irrigation, that lead to scarcity of food. These events include the WFD dinner, a meal packaging event and hunger walk.
This year’s WFD will be celebrated at a time when the United Nations (UN) is preparing for the Climate Change Conference, COP 22, which will be held from November 7 to 18 in Marrakech, Morocco. Countries throughout the globe have been asked to give special importance to food and agriculture in the climate action plans they provide. The FAO have also asked countries to raise their rural development investments. In Sep 2015, 193 countries committed to eliminate hunger by 2030.
Why Bet on Consumer Staples?
The concerns related to scarcity of food, which is one of the main reasons for hunger, are mostly associated with the consumer staples category. Even in a country like the U.S., the popularity of this category provides important indications about the financial markets and the overall economy. Though the sector has struggled for most part of this year, there is still scope for a rebound. Concerns including food deflation, rising competition and slowdown in demand in emerging markets affected the sector.
However, it is being speculated that signs of improvement in the U.S. economy in the second half of this year hold the key for the sector’s rebound. Recently released economic data, including the ISM manufacturing and services Indexes, consumer confidence data and consumer credit numbers have been encouraging, which indicates that the economy is back on track.
Separately, rising possibilities of a rate hike in December is also expected to attract investors’ attention to this category. Consumer staples is considered to be one of the major defensive sectors and is expected to remain relatively unaffected by a rate hike.
4 Stocks to Consider
Selecting financially strong consumer staples stocks, especially those whose operations are related to food production, might be a profitable option ahead of World Food Day. Food producing companies have an important role to play in eliminating hunger in the days ahead. However, picking winning stocks may prove to be difficult.
This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.
Sanderson Farms, Inc. (SAFM - Snapshot Report) is a fully-integrated poultry processing company engaged in the production, processing, marketing and distribution of fresh and frozen chicken products. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 12.95, lower than the industry average of 13.70. Its earnings estimate for the current year has improved 6.3% over the last 30 days.Sanderson Farms has a VGM Score of A and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ConAgra Foods, Inc. (CAG - Analyst Report) offers a wide range of food products, including meals, condiments, snacks, specialty potato products, milled grain ingredients, dehydrated vegetables and seasonings. ConAgra Foods has a Zacks Rank #2 (Buy) and a VGM Score of B. The P/E ratio for the current financial year is 19.21, lower than the industry average of 21.00. The company expects earnings growth of 18.2% in the current year. Its earnings estimate for the current year has improved 3.7% over the last 30 days.
Calavo Growers Inc. (CVGW - Snapshot Report) engages in the procurement and marketing of avocados and other perishable foods and the preparation and distribution of processed avocado products. ConAgra Foods has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 32.8% for the current year. Its earnings estimate for the current year has improved 1.2% over the last 30 days.
Tyson Foods, Inc. (TSN - Analyst Report) is one of the world's largest fully-integrated producer, processor and marketers of chicken and poultry-based food products. Tyson Foods has a Zacks Rank #2 and a VGM Score of A. The company expects earnings growth of 46.5% in the current year. Its earnings estimate for the current year improved 2.8% over the last 30 days.
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