Lara Crigger, editor-in-chief of VettaFi, recently appeared on TD Ameritrade to discuss retail performance and opportunities in current markets with host Nicole Petallides.
Target and Walmart recently reported first-quarter earnings that missed expectations and reflected the squeeze of rising costs in the current inflationary environment. It’s another hit when so much of the market is down and has advisors and investors looking for potential pockets of opportunity.
“The questions we’re getting right now at VettaFi are really around the food and beverage segment: if you look at Target’s earning report, you saw that there was a lot of pain from the discretionary sector but that there were some bright spots when it came to their grocery business,” Crigger explained.
The food and beverage industry has been one of the most overlooked performers in the first months of 2022 and is a beneficiary of an inflationary environment. Food and beverage stocks have been one of the best performers outside of energy this year.
Three main drivers will continue to apply upward pressures on food prices looking ahead. According to Crigger, continuing inflationary pressures will still take time to unwind, even if they have peaked, continued supply chain disruptions, and the geopolitical impacts happening around the Russia-Ukraine war.
“All that said, consumers still need to eat,” Crigger said, “so prices are going to stay high for some time.”
With inflation and retail weakness themes leading the way this week, @LaraCrigger is looking for opportunities 🧐
The @Vetta_Fi Editor-in-Chief shares her market outlook and talks grocery ETFs $PBJ $FTXG with @NPetallides 🎥 https://t.co/AVb9K0ir2Z
— TD Ameritrade Network (@TDANetwork) May 19, 2022
The Invesco Dynamic Food and Beverage ETF (PBJ) offers direct exposure to the space and holds 30 securities of the largest food and beverage companies, including grocery stores which could benefit from rising food prices. The sector overall is one of the few in the green this year.
The First Trust Nasdaq Food & Beverage ETF (FTXG) is another fund with access to the food and beverage space but takes a different approach. The fund typically doesn’t have allocations to grocery stores but instead is focused more on food manufacturers and growers. It offers exposure closer to the source.
“That ETF gets you closer to the farm, and the closer you are to the farm, the more exposure you’re going to have to the underlying commodities markets and raw materials prices, and that’s been good for FTXG so far this year, but it also does mean that you are more exposed to the volatility in this underlying market as well,” Crigger explained.
Consumer staples is a sector that could continue to perform better than other sectors due to the continued inflationary pressures that are driving up food prices, something that grocery stores and food and beverage companies could benefit from looking ahead.
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