Tyson Foods, Inc. (TSN) is trading higher on Monday morning after meeting fiscal third quarter estimates and reiterating full-year 2019 guidance. Revenues rose a healthy 8.3% year over year, continuing a growth trajectory that should attract buying interest into the new decade. Of course, many folks have ignored the slow-moving food production sector, fixated on FAANG stocks, chips, and all the fast movers now in full retreat due to the escalating trade war.
Meanwhile, food stocks and other defensive plays have been attracting a steady flow of rotational capital, with a number of household names coming off bear market lows. Strong dividend histories and primarily domestic exposure are adding value to this sleepy market segment, underpinned by trade tensions and a surging bond market that has dropped the 20-year Treasury yield to a three-year low.
TSN Monthly Chart (1995 – 2019)
Tyson price action has been stronger than most components, but the meat giant also pays a relatively low dividend, with a 1.87% forward yield. A multi-year uptrend topped out at $26 in 1999, marking a high that wasn't challenged for the next 14 years, ahead of a descent into the single digits during the 2000 to 2002 bear market. A mid-decade bounce stalled short of the prior high, yielding steady downside that ended at a 20-year low in 2008.
A 2013 breakout posted an all-time high in the mid-$80s in 2017, giving way to a deep slide that reached 2015 levels at the end of 2018. The recovery wave into June 2019 completed a round trip into the prior high, while a two-month triangle pattern may complete the last stage of a cup and handle breakout pattern. The stock traded into triangle resistance on Monday and could head higher soon, adding a major profit stream to the quarterly payout.
Other Food Stocks to Watch
Campbell Soup Company (CPB) pays a healthy 3.32% forward dividend yield. It topped out at $62.88 in 1998 after a powerful trend advance and sold off into a seven-year low in the upper teens in 2002. A mid-decade uptick failed at the 50% sell-off retracement level in 2007, while downside into 2009 held above the prior low, exhibiting resilience compared to the broad tape. This tailwind underpinned an Elliott five-wave rally that posted an all-time high in the upper $60s in 2016.
The stock plummeted after the presidential election, with shareholders rotating capital out of safe havens, and reached a seven-year low in the low $30s at the start of 2019. It has attracted modest buying interest since that time, filling out a basing pattern that may confirm a double bottom reversal and the first uptrend in more than three years. Patient investors could benefit greatly from that uptick, booking gains even if major benchmarks enter bear markets.
Kellogg Company (K) pays an impressive 3.58% forward yield. It posted steady gains in the 1990s, splitting twice before topping out at $50.47 in 1998. The stock fell to an eight-year low near $20 just two years later, marking the lowest low in the past two decades, ahead of a slow-motion rally that completed a round trip into the prior century's peak in 2006. A 2007 breakout stalled in the upper $50s in September 2008, just in time for the economic collapse, which knocked the cereal maker to a four-year low.
A recovery wave posted new highs between 2013 and July 2016, ahead of a persistent downtrend that may have ended at a seven-year low in June 2019. Price action has now completed a successful test at the 200-month exponential moving average (EMA), a significant technical accomplishment, while accumulation readings have surged to all-time highs. These twin tailwinds should support upside into the new decade, rewarding long-suffering shareholders.
The Bottom Line
Tyson Foods and other food stocks look like safe havens while the market struggles through international political tensions and a surging bond market.
Disclosure: The author held shares of Campbell Soup and Kellogg in a family account at the time of publication.