Investors have shunned slow and steady-moving packaged food stocks for fast-paced technology behemoths for most of 2018. And why not? In the first half of the year, adding portfolio holdings with eye-catching revenue growth proved a significantly more profitable venture than grappling with a downtrodden sector that has come under increased pressure from reduced established-brand loyalty from millennial customers, rising commodity costs and heightened competition from retailers' private brands.
Fast forward to November 2018. After a month that saw technology stocks put in their worst monthly performance since 2008, companies that have stable and reliable business models combined with attractive valuations have never looked so fancy. As investors bank some tech sector profits in the face of rising interest rates, slowing growth, peaking profits and a global trade war, the defensive consumer staples sector seems a likely beneficiary.
Investors who want to prep their portfolio to combat the current uncertainty and volatility sweeping financial markets should consider these three traditional packaged food stocks.
General Mills, Inc. (GIS)
Headquartered in Minneapolis, Minnesota, General Mills, with a market capitalization of $27.12 billion, manufactures and sells branded consumer food, such as cereal, snacks, baking mixes and dairy food. Well-known brands in the company's portfolio include Cheerios, Betty Crocker and Yoplait. General Mills, founded in 1866, is attractively valued with a price-earnings ratio (P/E ratio) of 12.7, well below the 19.1 average for S&P 500 stocks. As of Nov. 14, 2018, General Mills stock offers a 4.33% dividend yield and has returned nearly 6% over the past month.
The packaged food producer's share price has spent the better part of seven months trading within a seven-point trading range that has formed within a broad symmetrical triangle. Although the stock is well below its current year-to-date high of $58.73, recent momentum appears to have shifted with the price crossing above the 200-day simple moving average (SMA) and the triangle pattern's upper trendline. Investors who buy the breakout may choose to protect their position with a stop-loss order placed just beneath the October and November swing lows.
The J. M. Smucker Company (SJM)
Founded in 1897, J. M. Smucker produces and sells consumer food products, beverages and pet food. The company owns brands including Jif, Folgers, Crisco, Milk-Bone and Kibbles 'n Bits, and it sells Dunkin' Donuts coffee under a licensing agreement. The company's stock, with a $12.95 billion market cap and a dividend yield of 2.98%, has returned 10.34% over the past month, outperforming the packaged food industry average return by 7.05% during the same period as of Nov. 14, 2018. Smucker's P/E ratio of just 9.7 gives the company a discounted valuation compared with its competitors.
After spending most of 2018 in a gradual downtrend, the company's share price has reversed course in early November to break above the 200-day SMA and a downtrend line that connects March and August swing highs. Those who wish to purchase the stock should look for dips back to the $110 breakout level, which now acts as support. Consider using a similar money management approach as General Mills by sitting a stop slightly below this month's low.
Campbell Soup Company (CPB)
Campbell Soup, with an $11.8 billion market cap, is a leading global manufacturer and marketer of branded food and beverage products – best known for soup. Many consumers are familiar with the company's flagship brands, which include Campbell's, Pace, Prego, Swanson and V8. Campbell Soup acquired Snyder's-Lance in 2017 to add more on-trend snack food products to its lineup. Trading at $39.25, with a forward P/E ratio of 10.67, the stocks is up 5.8% over the past month as of Nov. 14, 2018. The company pays investors 3.57% dividend yield.
Campbell Soup's share price has formed a loosely constructed inverse head and shoulders (H&S) pattern throughout most of the year that suggests a possible long-term reversal back to the upside. Investors may want to wait for the stock price to move above the 200-day SMA and the H&S pattern's neckline at the $40 level before entering. Stops could sit below the chart formation's right shoulder.