Investing in Food Stocks

You may not know what the future holds, but you know there’ll be a meal involved. A good meal or grocery trip is not only a necessity for survival, it can also be part of an investment strategy.

While restaurants and grocery stores may come to mind, the world of food stocks is larger than one might think, encompassing everything from a grain of wheat to the latest on-demand app.

Food stocks and the industries surrounding them have long been a part of investors’ portfolios. The most recent figures show that Americans dedicate close to 10% of their disposable income on food, a level that’s been consistent for about two decades. Roughly half that is spent for food at home, and the other half is on dining out.

But some types of food stocks can hold more risk than others. Read on to learn the history of food stocks in the market, the types of food stocks, and the overall risk profile of these investments.

Are Food Companies Consumer Staples or Discretionary Stocks?

Looking at the market as a whole, food stocks are part of the “consumer staples” industry, which is considered to be a “defensive” sector in investing. Defensive sectors are those less closely tied to the economy. That means even if the economy is in a recession, consumer staples are seen as less risky and more stable than other industries.

However, no stock is recession-proof. And not all food stocks are actually consumer staples. For instance, restaurant companies typically fall into the consumer discretionary category, which consist of “cyclical stocks,” or those tied to how well the economy is doing. That’s because of how people tend to dine out when they have more income to spend in their pockets.

Recommended: Investing With the Business Cycle

When deciding whether to invest in a food stock, beginner investors might want to research which industry the company falls under: consumer staples or consumer discretionary.

Different Types of Food Stocks

Food stocks include more than just memorable brands. It’s more encompassing than just consumer-facing brands or restaurants. Anything that helps food get to your plate can be considered part of the food supply chain.

Food stocks generally fall under these seven sub-industries:

Farming

Food stock investing can start at the granular level–investing in raw agricultural commodities like soy, rice, wheat, and corn. Farming stocks can also include the ancillary companies that foster that growth–companies that create and distribute insecticide and herbicide or build the industrial-size farm equipment to help harvest goods.

While one might think investing in farming stock would be actual farms, the reality is the opposite. About 98% of farms in the U.S. are family-owned and therefore, not publicly traded. So investing in farming stock primarily means the chemicals and machinery that help harvest the raw product.

Farming stocks can waver based on things like the weather and current events. It can be challenging to predict the next rainy season or drought, sometimes making it hard to track and predict value. In addition, tariffs and trade agreements can influence the performance of these stocks, making them more volatile.

Recommended: Understanding Stock Volatility

Food-Processing Stocks

Companies that work in food processing buy raw ingredients that are combined to make items in the grocery store aisles or on restaurant menus.

Some names and brands in the food processing sector might not be familiar to the casual investor. More often than not, these companies are behind the scenes, operating at a large scale to provide the world oils and sweeteners.

Food processing stocks have their own quirks when it comes to investing. Unlike farming, they’re less influenced by the whims of weather or season, but they still have an associated set of risks. The costs associated with this industry vertical are vast, and price competition across brands can lead to drops or jumps in the market.

Stocks of Food Producers

Further up the supply chain comes food producers, where novice investors are more likely to know these brands and companies from daily life and dietary habits. Food producers take the raw ingredients provided by processors and create the items found on store shelves.

Break this vertical down further to find “diversified” and “specialized” producers.

As the name suggests, diversified food producers are companies that create a ton of different products under the same name umbrella, like Nestlé, which makes everything from baby food to ice cream.

Then there are specialized producers. They make consumer products as well, but these companies often cater to a narrower audience, producing only a few items, often within the same vertical.

In times of recession, luxury or expensive food processing stocks might take a dip. Additionally, consumer trends can influence the market. Take the alternative meat craze–a popular investment trend in recent years. Investors saw larger-than-average returns for the industry due to interest in the trend.

Food-Distribution Stocks

Distribution companies have little to do with consumption or production and focus more on logistics and transport. These companies send products across the country and world.

Distribution companies range from very large, reaching national distribution, to fairly small, where they connect specialty retailers. The distribution market might have its long-term players, but investing in it comes with its own risks.

Grocery-Store Stocks

Grocery stores have become big business in the investment game. The next link in the chain, grocery stores are where the products end up once a distributor drops them off.

Grocery store investments are hardly recession-proof, but the necessity of groceries as a staple for consumers suggests these investments take a lesser hit in a market downturn.

Recommended: Investing During a Recession

Restaurant Stocks

Restaurants are an additional resting place for food distributors. In economic downturns, discretionary restaurant spending is usually the first to go, making this industry within food investing slightly less stable than the others. Additionally, this arena might be most susceptible to trends.

Food-Delivery Service Stocks

The newest addition in food stocks is more about tech than good eats. Online delivery services have burst onto the scene, and with a limited history of performance, are considered to be riskier than the traditional food stocks outlined above.

Right now, delivery service companies are still duking it out across the country, expanding to new cities and slashing the price of services to entice customers.

Pros and Cons of Investing in Food Stocks

With all the ingredients in order, it’s time to highlight a few of the basic pros and cons of investing in food stocks.

Pro: Food stocks, particularly those that are consumer staples, can perform consistently. Food stocks can be a relatively safe, recession-resistant investment (but remember all stocks have inherent risk).
Con: Food stocks perform consistently. For an investor looking for a higher-risk investment, the steady year-over-year earnings might not be as enticing for someone trying to build a high-return portfolio.
Pro: Familiarity with brands. Many food stocks are also commonly found in investors’ pantries and refrigerators. For someone new to investing, buying stocks in the brands they trust and use could be a great way to dip their toes in the market.
Con: Not all food stocks are immune to ups and downs in the economy. Some companies, particularly restaurant groups or those that produce higher-priced products, may be hurt if discretionary spending by consumers pulls back.

The Takeaway

Investing in food companies can actually lead to investing in a wide range of different companies–those that are defensive and more immune to economic shifts, those that are cyclical and rise when the economy is hot.

It can also involve wagering on stocks that have long been a part of the food supply chain, as well as startup unicorn companies that are using innovative mobile technology to deliver meals to consumers.

For individuals who want to try their hand at picking food stocks, SoFi’s Active Investing platform may be a good option. Investors can buy traditional stocks, exchange-traded funds (ETFs), or even fractional shares of some companies. For those who need help, the Automated Investing service builds portfolios for SoFi Members and Certified Financial Planners can answer questions on investing.

Get started with SoFi Invest today.


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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Bitcoin Gold (BTG): Creation, Controversy, and How it Stacks up to BCH

Any conversation about cryptocurrency has to start with Bitcoin. It was the first crypto (it’s been around since 2009), it is the most valuable (worth over $1 trillion), and it’s the most traded (over $60 billion in daily volume). It also has the most spinoffs, or “forks,” that have become widely-used cryptos in their own right.

Perhaps the most well-known forks are Bitcoin Cash (BCH), which came out in 2017, and Bitcoin Gold(BCG), which was the product of a fork from Bitcoin a few months later.

What is Bitcoin Gold?

Bitcoin Gold was a hard fork from Bitcoin with the intent of further decentralizing Bitcoin. The idea was to use a new algorithm for the mining process that would not prioritize major mining operations, as some believed Bitcoin did.

Bitcoin Gold was an implicit criticism of Bitcoin, essentially arguing that it had betrayed or at least strayed from its initial roots as a decentralized currency with its increasingly centralized mining operations. Even if anyone can buy Bitcoin, it’s much harder (or at least not profitable) for anyone to create it.

Developers wanted to make it easier for normal computer users to mine on their own machines, a contrast to the massive Bitcoin mining industry, which is mostly done on specialized computer equipment purchased and operated by big-time operators in places like Iceland, where electricity is cheap. With Bitcoin Gold, however, the humble graphics card could carry the load.

Bitcoin Gold Controversy

Bitcoin Gold has been controversial almost since its inception. Typically with hard forks, owners of the initial cryptocurrency also receive units of the new one. For example, when Bitcoin Cash forked from Bitcoin, all Bitcoin owners got Bitcoin Cash.

When the Bitcoin Gold fork occurred, on the other hand, Bitcoin owners did not immediately get their new cryptocurrency. Instead, developers kept the Bitcoin Gold blockchain private for a few weeks so that they could mine BTG without competition—which they described as a “premine”. Critics opposed this practice, as it left fewer coins available for others to mine and also amounted to “free money” for the BTG developers.

As a result, cryptocurrency exchange and service provider Coinbase said it would not support BitcoinGold, explaining that because developers hadn’t made the code available for review by the public, it posed a security risk.

BTG Security Issues

Bitcoin Gold was worth over $8 billion when it launched, but fell dramatically in value as security issues emerged.

BTG has experienced multiple “51% attacks,” where an entity or individual or hacker is able to do the one thing that cryptocurrency is supposed to prevent: take control of transactions and “double spend” them, essentially stealing money. After one of the attacks, Bitcoin Gold was delisted from some exchanges.

In 2020, the developers behind Bitcoin Gold were able to fend off another attempt on the cryptocurrency’s network.
In early March 2021, the Bitcoin Gold team posted on its blog that its “hibernation has come to an end”—the 51% attacks that plagued the coin last year were ultimately defeated by the BTG miners and community.

What is Bitcoin Gold Worth Now?

Bitcoin Gold is ranked 73rd among cryptos according to CoinMarketCap (as of late April 2021) and has a total value of around $1.6 billion and a value per coin of around $90. Bitcoin Gold’s value was over $470 per coin at least twice in 2017, but has been under $100 since early 2018.

Bitcoin Gold vs. Bitcoin Cash Value

When comparing Bitcoin Gold vs Bitcoin Cash, the numbers speak for themselves: the original fork has a total value of almost $11 trillion, volume of almost $3 billion, and a value per coin of over $500. Bitcoin Cash is about 87 percent from its absolute peak value but is still substantially more valuable than its forked cousin on a “per coin” basis, at least so far, when it comes to Bitcoin Cash vs Bitcoin Gold, Bitcoin Cash is winning.

How to Invest in Bitcoin Gold

Bitcoin Gold is not available to buy and sell on mainstream exchanges like Coinbase, but, according to its organizers, it is available to trade on exchanges like Binance and Bitfinex.

The Takeaway

Bitcoin Gold is yet another hard fork of Bitcoin, like Bitcoin Cash. What distinguishes Bitcoin Gold is its intent: To further decentralize and democrative mining, making it more accessible to individual miners, rather than large groups with massive computing power.

For investors interested in building a crypto portfolio, buying crypto on SoFi Invest® can be a great way to start trading crypto. You can get started with just $10, we keep your crypto secure and protected from fraud, and you can manage your account in the SoFi app.

Find out how to invest in crypto with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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Source: sofi.com