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Remote Schooling May Boost 5 Packaged-Food Stocks

Remote Schooling May Boost 5 Packaged-Food Stocks
(David Smith | Dreamstime.com)

By    |   Tuesday, 08 September 2020 08:43 AM

Packaged-food stocks could stand to rise as the coronavirus pandemic forces kitchen tables and living rooms to turn into classrooms in the brave new world of virtual learning.

Evercore ISI’s David Palmer took a look at food sales in August, noting that they remained strong throughout the month and accelerated in the past two weeks.

“Since some students have already started their fall semesters, we wonder if the last week’s improvement could be the early signs of a very different back-to-school season,” he wrote to clients, according to Barron’s.

Barron’s explained that breakfast just very well may be the most important meal of the day for savvy investors. About two-thirds of students in the U.S. will have some kind of remote-learning this fall, and when families don’t need to rush out the door, there is likely more time for an at-home meal to start the day, the financial publication said.

Cereal sales, which had been languishing in the summer, were up 6% last week. “The breakfast and meal oriented companies seemed be the ones that experienced some acceleration lately—including Conagra (CAG), General Mills (GIS), and Kellogg (K),” Palmer wrote.

Piper Jaffray analyst Michael Lavery is seeing similar trends, showing that the at-home food trend has legs. “Retail sales for meal-oriented food companies are still growing at a double-digit pace, over five months past initial stockpiling.”

Moreover, some two-thirds of consumers he surveyed said they planned to cook an average of four or more meals a week even after the pandemic ends, with more than half unsure whether they will return to reopened restaurants. “This would suggest a potential sustainable lift of 15% or more, though what level is truly sustainable is not yet clear,” Lavery noted.

He suggested keeping an eye on B&G Foods (BGS) and Tyson Foods (TSN).

To be sure, investors in online-education companies no doubt view virtual learning as the present-day gold rush.

Shares of Chegg Inc (CHGG)., a Silicon Valley company specializing in homework help, have soared more than 120% this year. K12 Inc. (LRN), which operates online public schools, has doubled. Boxlight Corp. (BOXL), a Georgia company that sells classroom and teacher-training software to schools, is up 203% since April.

But some skeptics worry the enthusiasm may be getting out of hand. They say the shares of some of the publicly traded companies have become darlings of day-trading novices on Robinhood Markets Inc. If a coronavirus vaccine is developed and kids go back on-site, it’s unclear if parents will stick with their virtual or home-learning substitutes, Bloomberg explained.

“The question for a lot of these businesses is: Is this a one- to two-year bump and then does it settle back down, or is it sustainable?” said Adam Newman, co-founder and managing director at Tyton Partners, an education-focused investment banking and consulting firm. “People are exploring alternative models right now in part because of the virus. My question is, ‘Will they stay with the models after the virus disappears?’”

Parents who rely on these products may also be disappointed. Few rigorous academic studies have been conducted to show the effectiveness of online courses for students younger than college age. Research has generally found that less prepared students, including those from lower-income families, struggle to complete courses.

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Packaged-food stocks could stand to rise as the coronavirus pandemic forces kitchen tables and living rooms to turn into classrooms in the brave new world of virtual learning.
remote, schooling, packaged, food, stocks
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2020-43-08
Tuesday, 08 September 2020 08:43 AM
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