3 food stocks worth a bite

Credit: N Sawyer

Food stocks have nice defensive qualities about them, considering that people always have to eat. The Australian and global populations are growing which should see demand for produce increase at a steady rate.

Australia has the potential to be the ‘food bowl’ of our region, which could benefit the following three stocks:

Select Harvests Limited (ASX: SHV)

Select Harvests is Australia’s largest nut producer with a market capitalisation of $400 million.

It is one of the biggest almond producers in the world. Almonds are becoming more popular in our diets due to the health benefits. This is causing demand for products like almond milk to explode.

The company is quite reliant on what happens to the almond industry in California. However, now could be a good time to buy whilst sentiment about Select Harvests is negative with the almond prices lower than two years ago.

It’s currently trading at 18x FY17’s estimated earnings with a trailing grossed-up dividend yield of 9.19%.

Bega Cheese Ltd (ASX: BGA)

Bega is one of Australia’s largest dairy companies with a market capitalisation of $916 million.

It has a huge cheese segment to its business which provides reliable earnings and it also is involved in producing infant formula.

Bega recently bought Vegemite from Kraft, which is a great deal for Bega and Australian patriotism. Vegemite and cheese are meant to go together, so this deal could be great for cross-selling both products. It also acquired the peanut butter and salad dressings from Kraft.

Bega is trading at 32x FY17’s estimated earnings with a grossed-up dividend yield of 2.38%.

Tassal Group Limited (ASX: TGR)

Tassal is Australia’s largest fish company with a capitalisation of $758 million.

Most of its earnings are generated from its salmon farms in the waters around Tasmania. It recently got the good news that its Macquarie Harbour farms are now back to 100% compliance.

Tassal also has a business called De Costi Seafoods which is a seafood wholesaler for a variety of fish types.

Tassal is trading at 15.5x FY17’s estimated earnings with a grossed-up dividend yield of 4.8%.

Foolish takeaway

I reckon all three of these businesses are worth a nibble for your portfolio. At the current prices it looks like Tassal could be the best value and most likely to beat the market.

If the idea of investing in food stocks isn't to your investing palette, these stocks could be more to your taste.

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Motley Fool contributor Tristan Harrison owns shares of Select Harvests Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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