The advice of legendary investor Peter Lynch is simple: “Invest in what you know!” He even wrote a book about it, “One Up on Wall Street.” The thesis of Lynch was that investors knew what they liked and what was selling well at the local mall. From that, they had a huge advantage over Wall Street analysts.
Anyone in college knows what soup is all about, and every investor should follow the stocks in the sector ranging from prominent blue chips like Campbell Soup (NYSE: CPM) and ConAgra Foods (NYSE: CGA), to promising small caps like Soupman (NASDAQ: SOUP).
Soupman is an Up and Coming Player
For those who know anything about the hit comedy show “Seinfeld,” Soupman is tempting, indeed. It is the product from the legendary “Soup Nazi” episode. In addition to Seinfeld being a classic, so is the food from Soupman.
It was rated the best by Zagat.
The Super Bowl in New Jersey recently honored its Lobster Bisque (of little comfort to those rooting for Denver, however.) It is bringing out many new flavors to appeal to a wider range of tastes. There will also be “Soupmobiles” to capitalize from crowd feeding. Not only is the soup great, no matter the flavor, but Soupman is profitable, too.
Like the steam coming from a hot cup of soup on a winter’s day, revenues are also rising higher for Soupman (nearly 40 percent a quarter, according to Yahoo Finance).
Strong and Steady Soup Plays
Campbell and ConAgra do not offer investors the growth potential of a small cap like Soupman. Sales and earnings-per-share growth are steady for each. What should appeal to investors here is that growth also held up well for ConAgra Foods and Campbell Soup over the past five years, the period of The Great Recession. Few other stocks can make that claim!
But the income and the value features of each are mighty appetizing, though. At present, the average dividend for a member of the Standard & Poor’s 500 Index is around 2 percent. For ConAgra, it is 3.26 percent. The dividend yield for Campbell Soup is 3.13 percent. As income stocks, Campbell Soup and ConAgra Foods are tough to beat, especially with each having a history of increasing the dividend yield over time for shareholders.
There is plenty for value investors to like about ConAgra and Campbell, too.
ConAgra is selling at a price-to-sales ratio of 0.74. That means that each dollar of sales for ConAgr is priced in the stock at more than a one-quarter discount. Campbell’s has a return-on-equity of more than 30 percent. Warren Buffett, another legendary investor, considers a return-on-equity of 20 percent to be bullish for a company.
For growth, value, income investors there is something for all in soup stocks.
Consumer Staples are Key in Any Portfolio
As consumer staples, Soupman, ConAgra Foods, and Campbell Soup provide a solid foundation for an investment portfolio. During hard economic times, more soup is eaten by consumers. That makes these publicly traded companies great defensive stocks, as proven by the steady sales and earnings during The Great Recession. Soupman provides the growth that comes with small caps whose revenues are soaring in the double digits. All should consider a hearty helping of soup stocks, no matter if the objective is growth, income, or value investing!
What are your thoughts about investing in soup?
Jonathan Yates is a financial writer with degrees from Harvard, Johns Hopkins and Georgetown University Law Center. While much of his career was spent working for Members of Congress on Capitol Hill, he was also General Counsel for a publicly traded corporation; and worked in the research department of a brokerage house.