Takeover activity is heating up in the meat section of the grocery store as Hillshire Brands (NYSE: HSH) is the object of two suitors’ affections.
On Thursday, Tyson Food (NYSE: TSN) offered $6.1 billion for Hillshire, topping the unsolicited $4.5 billion offer for the company recently made by Pilgrim’s Pride (NYSE: PPC). Hormel (NYSE: HRL) has also been rumored to be a takeover target.
Traders and investors looking to get straight to the beef rather than picking potential takeover targets can consider the iPath Dow Jones-UBS Livestock Total Return Sub-Index ETN (NYSEArca: COW) tracks the performance of the Dow Jones-UBS Livestock Subindex Total Return, which is comprised of futures contracts on livestock commodities, including 54.2% in live cattle and 45.2% in lean hogs. The ETN has a 0.75%. [Unheralded Commodities ETN is Mooooving Higher]
COW is up nearly 12% year-to-date. Following a recent pullback, the ETN could be poised to deliver more upside.
COW “found support on a test of the backside downtrend line, just above the prior swing low. COW closed off the lows of the session, but will have quite a bit of overhead now at $31 with the 10 and 20-day MAs pointing lower, and the 50-day MA turning down,” said Deron Wagner of Morpheus Trading Group.
COW is down 2.4% this month, but that performance is almost impressive relative to other commodities ETFs and ETNs. Of the 20-worst performing ETFs in May, 15 are in some form related to commodities, including soft commodities such as coffee.
Tight supplies could lift cattle futures. Increased demand for heifers for breeding purposes is crimping heifer supply “which, in addition to exerting upward pressure on prices, will lead to reduced cattle slaughter and reduced beef production later in 2014 and beyond,” according to Drovers Cattle Network.
iPath Dow Jones-UBS Livestock Total Return Sub-Index ETN
ETF Trends editorial team contributed to this post.