Hormel Foods Corporation is a company based in the United States. The company designs, manufactures, and sells food products around the world. The company offers an assortment of meat, turkey, dips, jams, and many other food products under the SPAM, Skippy, Columbus, and many other brands. The company was founded in 1891.
Why You Should?
- Hormel Foods is a great reopening play in an investor’s portfolio. The company saw a drop in demand for its larger commercial products as restaurants and other large venues shut down. However, as this pandemic comes to an end, the company will see strong growth across all of its product categories return.
- The COVID-19 pandemic benefited the company in the short to mid-term. As the pandemic started to take hold across the nation, people stocked up on shelf-stable products like peanut butter and frozen foods. Consumers also ate more comfort foods at home during the pandemic. This helped the company slightly grow its sales during the overall year.
- Hormel Foods is also a fairly safe investment option in an investor’s portfolio. Despite the economic conditions, people across the nation and other parts of the world will continue to spend money on food products. This will help the company remain stable during rough economic times and stable operations will also benefit many investors in the company.
Why You Should Not?
- The company faces tough competition in the food industry. Some of these competitors include Tyson Foods, J. M. Smuckers, General Mills, and Conagra Brands. This competition might hurt the company and its investors in the future.
- The company continues to face a wide range of supply chain issues. For example, the company sells a wide range of turkey products. However, the company is unable to acquire animal feed, shipping services, and other logistics. Because of this, the company is unable to maintain a high level of inventory, leading to shortages in some markets.
- These supply chain issues have also caused costs to skyrocket. Due to inflation and shortages, the company has to pay more for animal, feed, freight costs, and employee wages. This has caused the company to increase prices and also lower its profit margin per product (this has fallen by double digits for certain products)! This will hurt the company and its investors.
- I think that there are better food stocks to invest in. I like stocks like Hershey’s, Kellog’s, and General Mills because of their higher dividends and a more diverse product portfolio. I think that these stocks are better investment options for those investors who are looking to diversify their portfolio into the foods industry.
I think that Hormel Foods is a decent long-term investment due to its position as a good reopening play, positive impacts from the pandemic, as well as its position as a safe investment option. However, tough competition, negative impacts from supply chain issues, high costs, and better investment options in the food industry might hurt the company and its investors in the future.