Is Protein as Good for Our Portfolios as It Is for Our Diets?

Companies across the food spectrum are benefiting from bulking up on protein, but that might just make our investments riskier.

Jul 18, 2014 at 5:31PM
Cheerios Protein Oats

Source: General Mills.

Everyone these days is on a protein power kick. General Mills is packing protein into its Cheerios, Hormel Foods is paying $450 million for protein supplement drinks maker Muscle Milk, and Yum! Brands' Taco Bell is replacing its Cantina Bell Menu with a new Cantina Power Menu that doubles the protein servings offered.

For years health professionals warned about too much protein in your diet, but today protein-heavy meals seem to be in vogue, and that appears to be infiltrating our portfolios as well, as companies try to bulk up their protein profile. Increased demand for protein was behind Tyson Foods' (NYSE:TSN) willingness to pay $7.7 billion to acquire Hillshire Brands and keep Brazilian meat processor JBS away from the prize.

It's not just in the U.S., either, but rather is something of a global phenomenon, albeit one that has been growing for decades. As my Foolish colleague Mark Lin points out, global consumption of protein has increased over four times over the past six decades, with consumption expected to reach 300,000 million metric tons by 2022, a six-fold increase from the 50,000 million metric tons consumed in the 1960s.



Yet it could also create a backlash. Beef and pork prices have rocketed to record levels due in part to drought and disease, but also because demand is surging. Even poultry is starting to climb as consumers turn to the lower-cost alternative just as there's a growing shortage of breeders.

As investors, we've been through this before. Back when the low-carb, high-protein Atkins diet craze gripped the country, shares of egg producer Sanderson Farms (NASDAQ:SAFM) hit what were then record levels of around $55 only to get cut by more than half a year or so later when the fad wore off. It's notable that in the latest round of high-protein eating, Sanderson's shares are nearly double what they were back then.

Then again, along with protein prices, everything is much higher today. Tyson's stock trades near its all-time highs, and Pilgrim's Pride, which was the vehicle JBS used to try to outbid Tyson for Hillshire, is closing in on its record highs again, while the $76 per share that fellow egg producer Cal-Maine Foods (NASDAQ:CALM) trades at makes the spike it enjoyed during the Atkins fad look like little more than a baby bump. Heck, even cereal maker General Mills is at its historical apex.

While most of these companies appear to still trade at reasonable valuations, it's hard to shake the notion we're seeing history repeat itself. They've gotten a big bounce from everyone jumping on the bandwagon. Moreover, there are macroeconomic factors at play, such as the Federal Reserve's monetary policies, which have inflated values everywhere, suggesting not that these are bad investments, just that they're not good ones at the moment. With long-term protein trends in their favor, these stocks may have just gotten ahead of themselves.

Still, even if you had bought Sanderson Farms or Cal-Maine Foods at their former peaks but held on through their collapse and subsequent resurrection, you'd barely remember the two years it took to get back to even. And today you'd be sitting on substantial gains. Even so, I like to buy my stocks at a discount, so I don't expect to be buying shares of these companies anytime soon.

Since I see the substantial gains they've made in such a short period of time as indicative of a coming pullback, betting there's more downside risk at the moment than upside potential seems the safer bet, no matter how much protein is muscling them forward.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Sanderson Farms. Try any of our Foolish newsletter services free for 30 days. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information