Here’s a Handful of Snack Stocks to Check Out This Year

The bull case for snack stocks’, and why the steady growth will persist in 2021.

While the pandy remains a significant threat, investors have set their sights past the next few months to a time when Americans could tip-toe back toward normalcy. That has been a problem for packaged-food stocks—which have thrived from the stay-at-home trend—but Wells Fargo [$WFC] maintains that there’s still value in the sector.

Analyst John Baumgartner said food stocks have been trading at a discount to other staples, as investors “continue to price in a return to structural decline (or at least a lack of growth) following an expected ‘one-hit wonder’ benefit from Covid in 2020.” Others fret that rising bond yields might harm stocks that entice shareholders with high dividend payouts. Yet he asserts that the sector’s “underlying execution remains far better than the Street gives credit.”

Atkins owner Simply Good Foods gobbled up healthy foods maker Quest Nutrition for $1 billion. Quest makes protein bars, cookies, chips and pizza under its own brand that have high protein levels and low sugars. “The acquisition of Quest strengthens Simply Good Foods’ position within the nutritional snacking category by expanding our portfolio of brands and product offerings while also providing us with greater consumer and channel diversification,” says Simply Good CEO Joseph Scalzo.

While widespread vaccinations are still months away, many investors fear that consumers will proceed with their old habits of dining out, which would sabotage packaged-food makers, and many consensus predictions bake in sales declines. In spite of that, there are reasons to believe that may not be the case: With 15% of U.S. restaurants closed, many permanently, and the rise of long-term work from home, at-home food spending will remain resilient, Baumgartner argues.

He added that analysts are glossing over 2022 sales and profits for some of the biggest packaged-food players—estimates that he is “highly confident will be beaten.” He forecasts new management teams and product innovation will help spark ongoing strength for the companies that the market isn’t pricing in. Fake Meat is Heating Up

Baumgartner’s top picks for 2021 are Mondelez [$MDLZ], which is seeing global growth but a low valuation; Simply Good Foods [$SMPL] and Nomad Foods [$NOMD], which are in the early stages of growth; and General Mills [$GIS] and Kraft Heinz [$KHC], two companies whose “growth is anything but flat.”

In 2015, Kraft Foods Group and H.J. Heinz Co. announced they would merge to form the world’s fifth largest food company.

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