Have you noticed that people seem to be stocking up all kinds of goodies and seeking out bargains and buying in bulk more than ever? Food costs have been on the rise for quite some time now but have you actually realized how much? Yeah, its cool to be a “stockpiler” nowadays.
According to the World Bank they estimate the cost of food has risen over 80% over the past three years. The biggest jump has been the price of wheat which has zoomed 180%. Like oil, food prices will probably stay high for the foreseeable future.
So far, grocery stores have been able to pass along the increases and protect their profit margins. I expect the current pattern will likely cause a pinch at some restaurant chains as consumers spend more time eating at home instead of eating out.
There are a few Grocery stocks I have added to my “Watch List”. A couple of them, Safeway (SWY, $31.32, up $0.27) and Kroger (KR, $27.06, up $0.02) are trading in the middle of their 52-week high/ low.
Costco Wholesale (COST, $73.29, up $0.64) looks strong as it continues to hit new 52-week highs. The June 72.50 calls (PRQFC, $3.50, up $0.70) are in-the-money now and are up a solid 25% today. Keep an eye on them.
Wal-Mart (WMT, $56.49, up $0.14) recently set a new high of $59.09 but always fades as it nears $60. If Wal-Mart can break $60 and hold, it could represent the next leg up on already impressive 30+ yearly chart. Click here to check it out.
And finally, I really think Whole Foods Market (WFMI, $34.50, up $0.50) is cheap down at these levels. The company purchased Wild Oats Markets last year and new-store openings hindered profits as costs went up. Like any other merger, it takes a few quarters to integrate two companies but Whole Foods will benefit from the acquisition of WOM. The sales growth in the natural and organic food industry remains strong and Whole Foods picked up a winner.
Whole Foods Market hit a 52-week low of $29.99 in March and seems to be back on track. Once these synergies kick in, the stock could continue its upward trend. Long-term, traders seem to be buying the January 40 calls (OAWAH, $2.28, up $0.17) which are up 8% today.