A Quiet Takeover That Could Corner a Booming Market
February 3, 2021
2020 was the year when preppers finally got their moment to shine.
We can all remember the early days of toilet paper shortages. But with that came shortages in all kinds of pantry items and foodstuffs.
As people hoarded nonperishables, you would expect that the companies making those products to do quite well.
That, however, turned out to be a mixed bag.
Some did better than others. While one was seemingly left far behind.
Now, that company has hopes of catching up.
Disparity in Your Pantry
The companies that compete for pantry space did, overall, turn in a pretty good 2020. While we still wait for a few full-year numbers, you can already see some winners.
The Kraft Heinz Co. (NASDAQ: KHC), for instance, saw sales grow 4.4% during the first nine months of 2020.
That led to a solid 11% share price performance for the company. And if you’ve been following this space, you know that’s a rare up year as the company has been struggling with large write-downs over the last handful of years.
McCormick & Company Inc. (NYSE: MKC), the leader in spices, did slightly better with net sales growing 4.7% and its share price jumping 12% on the year.
But bringing up the rear as one of the worst performers during this remarkable year for pantry goods companies was Hormel Foods Corp. (NYSE: HRL).
The company most known for its chili saw much flatter sales growth of just 1% and share price appreciation of just 2.7%.
As you can see, the company saw far less shock during the panic last March. But also, the least rebound of its industry.
However, because of a deal reportedly made just yesterday, that could start to change.
Cornering the Nut Market
Hormel, according to The Wall Street Journal, is entering a deal with Kraft to buy its Planters snack business for about $3 billion.
This might seem like it isn’t much of a news story. But it could have longer-term impacts.
For instance, adding Planters’ product mix to Hormel’s Skippy brand gives it one of the largest peanut shares of its market.
And that is important. Along with Planters’ products, it also gets its long-term procurement contracts. And that’s a lucrative asset right now.
Peanut prices have skyrocketed over the last year, now approaching their 2018 highs.
This is how the pantry game is won.
It may not be as exciting as a hot new technology or a flashy IPO. But there’s a large amount of money to be made here.
Hormel also offers one of the longest track records for dividend increases in a world desperate for income as interest rates continue to bottom out.
The company’s flat 2020 performance only makes this deal and its place in the market much more appealing right now.
Expect to see it carry its industry over the next 12 months if this deal goes through.
With Kraft’s need to divest its portfolio due to poor balance sheet management, that likely means an even better bang for the buck for Hormel.
This is one boring stock set to quietly beat the market for the foreseeable.
You have a chance to take advantage.
To your prosperity and health,
Joshua M. Belanger
Joshua M. Belanger
Joshua Belanger is founder of CounterVest and the editor of Hot Money Trader. He has been providing ordinary investors blockbuster returns since 2008. In 2018, the average return of Hot Money Trader beat the markets by over 15%
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