As the bull market grinds on, I expect to see a rotation of money flows into some undervalued groups, such as food stocks, asserts Dr. Joe Duarte, technical expert and editor of In the Money Options.
I am recommending purchasing shares of Tyson Foods (TSN) a leader in chicken, beef and pork production and prepared foods. Tyson has quietly become a food sector giant via acquisitions that have diversified the company beyond its traditional livestock production unit.
Indeed, the odds of purchasing a Tyson product without realizing it are nearly astronomical as the company owns the Jimmy Dean, Sara Lee, Ball Park and Hillshire Farms grocery store staple brands among others.
This is the reason the company has grown its revenues to $40 billion dollars per year over with little fanfare. More important, there is a major chart reversal in the works, as the stock has been decimated over the last twelve months and is now under accumulation.
The bottom line is that Tyson is a major player in the steadily improving food sector and is very cheap. The stock sells at seven times earnings making it a huge value play and a target for bargain seeking mutual funds in a market where P/E ratios have skyrocketed over the last 18 months.
Tyson is my third food company recommendation. I recently recommended corporate food giants Archer Daniels Midland (ADM) and Hormel (HRL). Both stocks are under accumulation and under rising volume. This is usually a sign that higher prices are likely on the way.
While the conventional wisdom is that trade wars are not good for this sector, money continues to move in, which tells me that smart money knows something the rest of us don’t. I like ADM because of its dominance of the corn market, especially regarding animal feed.
I am watching grain prices and would not be surprised if a rally materialized in the face of a possible surprise in winter weather. Thus I would not be surprised to see rising corn prices over the next 12-18 months.
Hormel is a dominant player in the pork market which is currently fairly tame. Yet, the stock is moving nicely higher which means that there are still more believers out there who will join the buying spree just on momentum.
But what I really like is the fact that Hormel received a brokerage house downgrade from Barclays on 8/24/18 after the company cut its revenue forecast for the year based on trade uncertainty and the stock broke out of a multi month trading range.
