Everyone's gotta eat, right? Food stocks may not be as defensive as you think

Filed under: Earnings reports, Bad news, Newsletters, Stocks to Sell, Recession

I often talk stocks with my father, and he believes that with the economy in tatters, the big beneficiaries in the coming year will be companies that produce and sell food. His simple theory is that with discretionary spending at a minimum, "everybody still needs to eat."

While it's certainly hard to argue with the fact that we all need sustenance, a different case can be made for investing in suppliers and vendors of food.

My dad thinks prices at the store will rise much higher because it's still cheaper than eating out, thus, great profits will be had by everyone up and down the supply chain.

But I'm not so sure.

Cal-Maine Foods, Inc. (NASDAQ: CALM), which released earnings on Monday, is a good example of why I'm not jumping onboard with this theory.

The company, which is currently the largest producer and distributor of fresh-shell eggs in the United States, said profit for its second fiscal quarter fell 32% as sales to egg-product makers and the food service industry slowed, and feed costs remained high.

Cal-Maine earned $1.14 per share for the quarter ended Nov. 29, but last year it earned $1.69 a share.

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Everyone's gotta eat, right? Food stocks may not be as defensive as you think originally appeared on BloggingStocks on Tue, 30 Dec 2008 17:30:00 EST. Please see our terms for use of feeds.

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