Companies that Could Rise with the Price of Nuts

Brittney Barrett |

Emerging markets are weakening, tech is on a down trend, unemployment is higher, Europe is shaky and housing prices are weak. With seven of eight of the last weeks of the stock market ending in losses, it doesn’t seem like there’s much to get excited about. In these uncertain times, there is one demographic reality that is influencing pricing, the population is growing. With a higher population comes more demand for food and with higher demand comes higher prices. That has atleast been the trajectory over the course of this year as the prices of food stocks and food itself has gone through the roof. At the helm of this revolution have been corn and nuts. Even when the rest of the economy is shaky, people still need to eat, meaning these stocks have a higher chance for producing stable gains.

It’s worth mentioning that these companies are expensive and will be best for long-term investments as prices edge up with population growth and demand. That said. Here are three companies that look promising and may have a chance to chug higher more quickly than the rest of the industry.

Diamond Foods (DMND): From almonds to pecans, the price of nuts has been on the rise. Pecans are becoming especially expensive as Chinese demand for the nut rises. This, in turn, bolsters the profile of the nut distributors. Diamond Foods falls into this category. A large company that specializes in nuts and other snacks like, Pop Secret and the highly popular Kettle potato chips, already has a devoted following, but the uptick in demand for nuts could further help the company. Diamond also recently acquired Pringles from Procter & Gamble, a move that could help their presence overseas. This, combgined with an initiative to expand their Kettle chips brand, which many consider to be the crème de la crème among potato chips, could help sales move even higher. Earnings for the company continue to climb.

John B. Sanfilippo & Son (JBSS): While Diamond, a long established company with a history of solid earnings and strong brand recognition  is appealing, John B. Sanfillipo offers similar wares but for a much lower price. In recent trading John B. Sanfilippo & Son has been moving significantly higher though it’s still nearly half of its 52-week high, meaning that it has serious potential to reach it again. The company plummeted in the late April after it released 3Q earnings that indicated more sales but lower profits and higher losses. The recent spike in share prices and in the price of nuts; however, could drive Sanfilippo, which processes and markets  tree nuts and peanuts in the United States under a variety of private labels  likeFisher, Orchard Valley Harvest and Sunshine Country brand names, back up to pre-earnings highs. The gross profit margin last quarter declined in the quarterly comparison largely because the company had not yet adjusted  prices to compensate for higher acquisition prices. Higher demand for tree nuts had pushed up costs for the company and they did not adjust for the difference until February shipments. Since then, it’s likely the company regained losses and put itself back on a trajectory for growth.

 

 

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
DMND Diamond Foods Inc. n/a n/a n/a 0
FET Forum Energy Technologies Inc. 19.86 0.06 0.30 1,667,639
JBSS John B. Sanfilippo & Son Inc. 51.33 -0.58 -1.12 105,524

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