The market ebbs and flows based on investor sentiment. The need to eat never changes. One way to protect yourself from the ups and downs of the market is to focus on food stocks like General Mills, Inc. (NYSE:GIS), Campbell Soup Company (NYSE:CPB), and Kellogg Company (NYSE:K), where supply and demand work on a totally different biologic system.
“Markets move in cycles. Investors who forgot that fact in the late-1990's learned it again by the 2002 lows... Investors who forgot that fact in 2007 learned it again by 2009... They have already forgotten, so investors will have to learn it yet again.” That's an abridged quote from mutual fund manager John Hussman.
It points out a basic fact about the stock market that investors don't like to hear: prices go both up and down. You can move beyond this cyclicality by building a portfolio that doesn't have the same dynamics. One key area that moves to its own beat is food. You have to eat, it doesn't matter what the economy or stock market are doing.
Here are three food stocks that made it into Hussman Strategic Dividend Value Fund:
Perhaps the best example of a stable business is General Mills, Inc. (NYSE:GIS). The company is among the largest players in the packaged food category. Its brand portfolio includes such well-known names as Cheerios, Green Giant, Progresso, Betty Crocker, and Yoplait. Each is an important brand in staple food categories.
Impressively, General Mills' top and bottom lines grew right through the deep 2007 to 2009 recession. And it has increased its dividend on an annual basis since 2004. While the stock sold off during the recession, investors focusing on the core business would have clearly seen a continuation of solid results. This is part of the reason why the shares quickly recovered.
More recently, input costs have been pinching profitability. That's an ongoing issue in the food business, since commodity prices can, and often do, change dramatically and swiftly. Still, the top line hasn't stopped expanding at General Mills, which means the bottom line and dividends are both likely to keep moving generally higher, too.
With a 3% or so dividend yield, General Mills, Inc. (NYSE:GIS) would be a good option for investors looking for a consistent performer. That said, the shares are trading near all-time highs, so more conservative types might want to watch for a pull back.