NEW YORKThe food and beverage industry has turned out to be a safe bet for investors over the last half decade.
The S&P Food & Beverage Select Industry Index boasted a price return of 139.96% over a 5-year period (from Feb. 10, 2009 through Feb. 10, 2014) while the return over the same period was 95.55% in the Dow Jones U.S. Food and Beverage Index.
The price return reflects the increase in the value of the stocks and excludes any dividend payments to shareholders.
Shareholders also have fared well over the short-term, with the S&P and Dow Jones food and beverage indexes reporting 1-year returns of 25.15% and 13.61%, respectively.
Green Mountain Coffee Roasters, Constellation Brands Soar
A few companies have been smacking homers on Wall Street. According to the Dow Jones U.S. Food and Beverage Index, Green Mountain Coffee Roasters, Inc., (NASDAQ: GMCR), reported a 1-year return of 145.6% and a staggering 5-year return of more than 1,127.29%.
In the 13 weeks that ended Dec. 28, 2013, net sales rose 4% in what GMCR's CEO Brian Kelley dubbed "our best holiday season ever" as the company sold a record 5.1 million Keurig system brewers. Last month, GMCR announced a 10-year pact with the Coca-Cola Company to collaborate on the development and introduction of Coca-Cola's brand portfolio for use in an at-home beverage system that GMCR's plans to debut.
Since the board of directors authorized a stock repurchase program in August 2012, GMCR has purchased 10.5 million shares for $387 million at an average price of $36.92, the company revealed Feb. 5 in its fiscal quarter results.
Coffee is not the only smoldering stock. Investors in Constellation Brands, Inc., (NYSE: STZ), benefited from a 1-year return of 141.98% and a 5-year return of 411.75%, according to the Dow Jones U.S. Food and Beverage Index. In the most recent quarter that ended Nov. 30, 2013, the beer, spirits and wine giant reported a $211 million profit, nearly double its net income ($109.5 million) in the year-ago period.
Last year, Constellation Brands acquired Grupo Modelo's U.S. beer business from Anheuser-Busch InBev for $4.75 billion, assuming full control over a Crown Imports LLC portfolio that boasts such notable brands as Corona and Negra Modelo.
Shareholders Lose with Hillshire Brands, Dean Foods
Over the last half decade, most food and beverage stocks have paid off for investors. Of 32 companies tracked in the Dow Jones U.S. Food and Beverage Index over a 5-year period, all but two reported positive returns. Dean Foods Co. (NYSE: DF) suffered a negative 5-year return of 58.49%, while the return at The Hillshire Brands Co. (NYSE: HSH) was a negative 19.66%, according to the index. Of 52 companies tracked over a 5-year period in the S&P Food & Beverage Select Industry Index, five businesses suffered negative returns: Chiquita Brands International, Inc., (NYSE CQB) (26.92%); Dean Foods; Diamond Foods (Nasdaq:DMND) (5.60%); SuperValu, Inc., (NYSE: SVU) (67.76%); and Hillshire Brands.
Are Times A Changing?
At least some analysts think now is a good time to buy stock in Dean Foods, the dairy and soy products producer whose 2013 net loss attributable to the company totaled $813 million. According to data from Zacks Investment Research via the Nasdaq, four equity analysts recommend a "strong buy" on the stock, one has a "buy" rating and four analysts have rated the stock a "hold."
According to Zacks, analysts covering both Diamond Foods (the marketer of walnuts) and the retailer SuperValu have one "strong buy" on each stock and four "hold" recommendations for each company. In February, Diamond Foods completed a debt offering of $200 million, closed a $125 million credit facility and entered into an agreement for a $415 million credit facility.
Nasdaq doesn't cite analysts' ratings on Chiquita Brands, the banana distributor, or Hillshire Brands, which was formerly known as the Sara Lee Corp. and .
Dr Pepper, ConAgra Big Winners
Some of the big boys in the food and beverage sectors have posted modest or even negative short-term returns but investors who held onto the stocks for the long haul reaped the rewards. Consider:
· Over a 1-year period, Coca-Cola (NYSE: KO) underperformed with a negative 0.52% return; investors enjoyed a 89.67% return over five years.
· Although ConAgra Foods, Inc., (NYSE: CAG), reported a negative return (6.98%) over a one-year period, it boasted a 5-year return of 88.41%.
· Dr Pepper Snapple Group (NYSE: DPS) posted a 1-year return of 6.49%; the five-year return was killer: 214.80%.
The results tend to support conventional wisdom when investing in the stock market: be patient.
Consider B&G Foods, Inc., (NYSE: BGS). While the company posted a negative 1-year return of 2.11%, shareholders who stuck with food manufacturer and distributor for five years have reaped an astonishing 559.41% return on their investment.
Another perk: B&G Foods returned an estimated $63.54 million to shareholders last year plus $120.7 million in the three prior years in dividend payments.