The food industry is a major sector of the economy that will always be in demand. As the global population grows and people’s diets continue to change, there are many attractive food investment opportunities. Investing in food stocks or funds can provide exposure to stable dividend-paying companies as well as growth opportunities. This article discusses the best ways for investors to gain exposure to the food sector through funds.
Target broad food ETFs for diversification
One of the simplest ways to invest in food is through a broad food ETF. The Invesco Dynamic Food & Beverage ETF (PBJ) tracks an index of U.S. food and beverage stocks and provides exposure to companies like Tyson Foods, Archer Daniels Midland, and Monster Beverage. The First Trust Nasdaq Food & Beverage ETF (FTXG) is similarly diversified across large food manufacturers, producers, distributors and retailers. These ETFs offer a low-cost way to invest in the sector while achieving solid diversification across sub-industries like packaged foods, agricultural products, restaurants and grocery stores.
Focus on meat with specialized funds
For investors who want to make more targeted food investments, there are ETFs and mutual funds focused specifically on the meat industry. The VanEck Vectors Agribusiness ETF (MOO) holds stocks of companies involved in agriculture, meat production, processing, and distribution. Top holdings include Deere & Company and Tyson Foods. The USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund (SDCIX) is an actively managed mutual fund investing in commodity futures including livestock. These specialized funds offer concentrated exposure to meat-related stocks and commodities.
Invest in farmland with real asset funds
Another way to invest in the food sector is through funds that own farmland. As the world’s arable land decreases, farmland is a real asset that could appreciate. The USCF Investors Real Asset Fund (IRLNX) holds domestic and international farmland along with other natural resource assets. Many non-traded REITs like Gladstone Land (LAND) and Farmland Partners (FPI) own U.S. farmland and pay steady dividends. While not very liquid, these real asset funds provide direct exposure to the vital agricultural land that supports food production.
Target consumer stocks with specialized mutual funds
For exposure to the food brands themselves, specialized mutual funds invest in the stocks of consumer food companies. The Fidelity Select Consumer Staples Portfolio (FDFAX) has major holdings in companies like Coca-Cola, PepsiCo, Mondelez, and General Mills. The BlackRock Basic Value Fund (MABDX) also invests significantly in leading food manufacturers and distributors. These active stock funds offer concentrated exposure to the brand names that dominate grocery store shelves and maintain pricing power.
Invest globally with international food funds
The worldwide food sector presents many opportunities beyond American companies. The WisdomTree Global Consumer Growth Fund (WGRO) holds consumer stocks from developing markets, with significant exposure to global food and beverage companies like Danone, Unilever, and Suntory Beverage & Food. The Forward Global Food and Agriculture Fund (FFALX) is an actively managed mutual fund investing in agriculture, protein producers, fertilizer companies, distributors and more across markets including China, Brazil, and India. These international funds allow investors to capitalize on the growth in emerging market consumer demand.
Food is a defensive, non-cyclical sector that will always be in demand. Investing in food stocks and funds can provide portfolio stability, income, and exposure to growth opportunities. Broad food ETFs offer diversification, while more specialized funds target sub-sectors like meat producers, farmland, and consumer staples companies. Allocating a portion of your portfolio to food investments can be a tasty addition.