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JPMorgan Chase & Co (JPM), Xerox Corporation (XRX): How To Profit From ‘Food-Stamp Nation’

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“I hesitated to write about this trend. It’s disturbing. Many of its facets are also politically charged. But as an investor, I have to avoid politics. There’s no money to be made by laying blame or opining about what should be. My only job is to find strong trends that support an investable idea.”

So noted Amy Calistri in the introduction to the most recent issue of Stock of the Month.

I’ll get to Amy’s “investable idea” in a moment.

First, some grim realities…

Four out of five American adults struggle with joblessness, near-poverty or reliance on welfare at some point in their lives. That’s what The Associated Press reported in late July, based on what it said was exclusive survey data.

This report came on the heels of a July 17 Gallup poll showing that a fifth of two-parent households in the United States said there were times during the preceding 12 months when they struggled to afford food. Among single-parent households, the portion of those reporting food-affordability problems soared to nearly a third.

Against that backdrop, it should come as little surprise that nearly 1 in 6 Americans receives food stamps.

What may be surprising, however, is that food-stamp use as of June was up 2.3% from a year earlier, to nearly 47.8 million participants.

That’s right. Even as the unemployment rate has dropped and as a number of other economic indicators have steadily improved since the recession, the number of food-stamp recipients continues to climb.

One reason for the apparent discrepancy: the swelling of the ranks of the “working poor.”

As Amy pointed out in the current issue of Stock of the Month, the number of jobs in the low-paying food-and-drink service sector grew 21.3% in the past 10 years, while other jobs increased by just 3.2%.

In 2010, 26.9% of fast-food workers participated in the food-stamp program (which, since 2008, is officially known as the Supplemental Nutrition Assistance Program, or SNAP). Since then, Amy wrote, “the minimum wage hasn’t changed, (but) the ranks of fast-food employees have grown.”

Moreover, according to Amy, 284,000 college graduates — some with advanced degrees — worked in minimum-wage jobs last year. That’s up 70% from a decade ago.

Wherever there’s a societal or business trend in the making — however troubling — chances are someone stands to benefit. And toward that end Amy looked to the administration of the food-stamp program itself for her investable idea.

You see, just as the numbers of SNAP users — and their profiles — have changed over the years, so has the “stamp.”

The nation’s largest food assistance program has its roots in the Great Depression in the 1930s, when the government issued blue stamps to subsidize the cost of food that was in surplus. After an 18-year hiatus, the idea was revived in the 1960s, expanding into a permanent program that sold discount food coupons to low-income people. In 1977 the government began distributing food stamps to the poor for free.

These days, food-stamp purchases are made electronically — on plastic Electronic Benefit Transfer (EBT) cards, which resemble credit cards.

A waiter for the Las Vegas Guardian Express recently called the EBT cards “the American Express card of the 21st century.”

Amy recently called them the basis for her September “Stock of the Month.

Bob: In Stock of the Month, you refer to a “wave of SNAP recipients to come.” Who are they?

Amy: Older Americans, those age 60 or older. The average monthly Social Security check for a retired worker is $1,269.38. The average monthly Social Security check for the spouse of a retired worker is $633.27. The median retirement savings of all households nearing retirement is just $12,000. Even for households with a designated retirement account, median savings are just $100,000 for the soon-to-retire. All in all, it’s not an encouraging outlook.

Roughly 3.8 million people age 60 or older currently receive SNAP benefits, but many more are eligible.

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