Day: October 14, 2024

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The investor appetite for big food stocks is as thin as I was back in the mid-1980s.

Note in that time period I was about five years old.

“From a generalist investor standpoint, I would say it has been pretty quiet [around packaged food names]. Your typical kind of institutional money has been quieter in the space,” youthful, energetic packaged food analyst at Bank of America Peter Galbo said on Yahoo Finance’s Opening Bid podcast (video above; listen below).

The way Galbo explained it to me, investors are in search of faster-growth stocks ahead of a prolonged stretch of Fed rate cuts. Think of the desire to devour Nvidia (NVDA) shares on any dip, as opposed to eating up General Mills (GIS) on a pullback.

You can easily see that in some Yahoo Finance-sourced data.

Nvidia’s stock is up a sizzling 168% year to date. General Mills is only up 10%. PepsiCo (PEP) and Conagra Brands (CAG) are both up roughly 2%. Hormel (HRL) is down 4%.

The S&P 500 (^GSPC) is up 21% this year, the Dow Jones Industrial Average (^DJI) 13%, and the Nasdaq Composite (^IXIC) 20%.

But as I digested (pun intended) my in-depth chat with Galbo, I think there are a few other fundamental reasons that are keeping these companies out of investor shopping baskets (pun also intended).

Your shopping list of explanations:

1. The companies are still too big inside an investing world that’s no longer rewarding the conglomerate model. Investors want focused strategies executing at the highest level. For instance, does Conagra Brands need to be selling frozen food and also hawking Slim Jim and Duke’s meat snacks? Should Spam maker Hormel have purchased the Planters nut business from Kraft Heinz (KHC) a few years ago?

2. The companies want to get even bigger despite investors not rewarding the play! Conagra Brands just purchased the Fatty meat snacks line. The company now has the meat snacks market cornered with Slim Jim, Duke’s, and Fatty. Galbo tells me meat snacks are a growth category in snacking. Fair, but I question why one must own three meat snack brands!

3. The companies are slow to slim down their slower-growth businesses. Only recently did General Mills sell off its North American yogurt business for $2 billion. Campbell Soup is hunting for a buyer for the Noosa yogurt business it got with its Rao’s business. I didn’t get the sense from Hormel’s latest earnings call it’s going to sell the Planters business amid signs the deal may not be working out as planned.

4. Consumers are pissed off at Big Food for its pricing strategies and are voicing their views by purchasing less. You saw that in PepsiCo’s volumes this week.

5. The cumulative effects of four years of inflation continue to pressure so many households. Buying snacks is now a luxury.

6. Traffic at convenience store stores has really trailed off the past year for economic reasons, but shopping has also shifted to club stores such as Costco (COST). Convenience store channels need to be doing well for a lot of food players to do well.

7. The Ozempic threat on the long-term health of Big Food earnings power is rising every single day as new users of these drugs enter the market.

Story continues

Bonus reason: The stocks aren’t valued for the realities listed above. They are still being seen as defensive value plays since the companies sell food.

That’s the wrong way to think about it, I believe — it’s hard to defend Hormel trading at almost 19 times forward earnings, which isn’t too far removed from the S&P 500’s forward multiple around 21 times. An old rule of thumb in investing is that a 15 times forward P/E multiple is on the attractive side (I caution this is not always the case and each company is unique, so don’t use my line as gospel).

Then, there is raw commentary that I would argue is weighing on the sector’s multiples.

First up: These companies have become political punching bags this election season. Vice President Kamala Harris has vowed to tackle price gouging by Big Food if she wins the White House in November.

Senator Elizabeth Warren has been making the rounds talking about shrinkflation and taking food companies to task for it.

All of this rhetoric doesn’t exactly embolden investors to go search for diamonds in the rough in the food space.

There is also what we are hearing from consumer company executives, which suggests a strong rebound in sales and earnings isn’t guaranteed in 2025.

“We see that [the] consumer is very challenged, and that the consumer is making a lot of decisions. They’re optimizing their full budget, so they might be cutting on food to pay for their subscriptions, or they might be cutting on food to go to see movies on the weekend. Really, there is a lot of trade-offs they’re making when it comes to food.” PepsiCo chairman and CEO Ramon Laguarta told me this past week moments after earnings hit the wires.

The company trimmed its full-year sales outlook.

This aligns with what Walmart (WMT) CEO Doug McMillon told me last week at the retailer’s Bentonville, Ark., HQ.

“People at lower income levels are always more challenged. They have to make trade-off decisions, and that’s been, I think, more acute since this inflationary cycle on the heels of the pandemic. So, a household income below $100,000 feels pressure in a way that they might not have a few years ago, and you can see that in their behavior. And we are trying to get prices down … some of the more stubborn inflation has been in the prepared foods, dry grocery type, consumable categories, like paper goods, cleaning supplies,” McMillon said.

I wish Big Food well in regaining the hunger of investors. After all, these companies do feed the planet. It will be tough, however.

Three times each week, I field insight-filled conversations with the biggest names in business and markets on Opening Bid. Find more episodes on our video hub. Watch on your preferred streaming service. Or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.

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Submits Proposals to Elect Eight Independent Best-in-Class Nominees and Remove
Eight Current Directors

Calls on Southwest to Confirm Meeting Date Promptly Without Unnecessary
Delay

Shareholders Should Take Action As Soon As Possible to Ensure They Are Able to
Vote Their Shares

WEST PALM BEACH, Fla., Oct. 14, 2024 /PRNewswire/ — Elliott Investment Management L.P. (“Elliott”), which manages funds that together have an investment representing an approximately 11% economic interest in Southwest Airlines Co. LUV (the “Company” or “Southwest”), today announced it has delivered a request to call a Special Meeting of Shareholders (“the Special Meeting,” or “the Meeting”) for December 10, 2024 and will be filing an accompanying preliminary proxy statement with the U.S. Securities and Exchange Commission.

Elliott released the following statement on behalf of Partner John Pike and Portfolio Manager Bobby Xu:

“Today, after exhaustive attempts to persuade Southwest to implement the necessary governance changes, we are formally calling a Special Meeting to give shareholders the opportunity to elect a completely independent, best-in-class slate of director nominees. Absent a thorough reconstitution of its Board, the story of Southwest will remain one of empty promises and unfulfilled potential. The nominees we have put forward today are uniquely qualified to hold the Company’s executive leadership accountable and ensure that the Company delivers improved results.

We are taking this step today because the need for improved oversight at Southwest has never been more urgent. Following Elliott’s public push for changes, Southwest has responded with a series of long-overdue strategic and corporate-governance initiatives, promising that better performance will follow. However, Southwest’s shareholders have heard these sorts of promises before, and what they need today, at the outset of this attempted turnaround, is an experienced, highly qualified Board to oversee the changes and ensure successful execution. Southwest’s shareholders cannot afford to see – yet again – today’s new initiatives turn into tomorrow’s broken promises.

We strongly urge all Southwest shareholders – particularly those who engage in share lending or authorize their brokers to engage in share lending – to work with their banks and brokers as soon as possible to confirm that they will be able to vote all their Southwest shares. We also call on Southwest to confirm the date of the Meeting for December 10, 2024, and to publicly announce a reasonable corresponding record date promptly, without any gamesmanship or defensive maneuvers.

It is time for shareholders’ voices to be heard, so that Southwest can finally deliver on its full potential for customers, employees and shareholders alike. Electing a world-class slate of exceptional director candidates is the essential first step to making this happen.”

Elliott has submitted a proposal to elect the following eight director candidates to Southwest’s Board:  

• Michael Cawley, the former deputy CEO, COO and CFO of Ryanair
• David Cush, the former CEO of Virgin America
• Sarah Feinberg, a former senior official at the Department of Transportation and former head of the Federal Railroad Administration
• Hon. Josh Gotbaum, a longtime advisor to companies and labor groups and the former chapter 11 trustee of Hawaiian Airlines
• Dave Grissen, the former Group President of Marriott International
• Robert Milton, the former CEO of Air Canada and ACE Aviation Holdings and the former Chairman of United Airlines
• Gregg Saretsky, the former CEO of WestJet
• Patty Watson, the current EVP and Chief Information & Technology Officer at NCR Atleos and a longtime technology executive

Elliott has also submitted a proposal for the removal of eight current Southwest directors: Douglas Brooks, Eduardo Conrado, William Cunningham, Thomas Gilligan, David Hess, Gary Kelly, Elaine Mendoza and Jill Soltau.

Any shareholders who have questions about what they need to do to vote their shares should contact Elliott’s proxy solicitor, Okapi Partners, by calling toll-free (877) 629-6357 or by emailing info@okapipartners.com.

CERTAIN INFORMATION CONCERNING THE PARTICIPANTS

Elliott Investment Management L.P., together with the other participants named herein (collectively, “Elliott”), intend to file a proxy statement and accompanying proxy card with the Securities and Exchange Commission (“SEC”) to be used to solicit proxies with respect to the election of Elliott’s slate of highly qualified director candidates and other proposals that may come before the next shareholder meeting of Southwest Airlines Co., a Texas corporation (the “Company”), whether an annual or special meeting of shareholders.

THE PARTICIPANTS STRONGLY ADVISE ALL SHAREHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS, INCLUDING A PROXY CARD, AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR.

The participants in the solicitation are anticipated to be Elliott Investment Management L.P. (“EIM”), Elliott Associates, L.P. (“Elliott Associates”), Elliott International, L.P. (“Elliott International”), The Liverpool Limited Partnership (“Liverpool“), Elliott Investment Management GP LLC (“EIM GP”), Paul E. Singer (“Singer”), Michael Cawley, David Cush, Sarah Feinberg, Joshua Gotbaum, David Grissen, Robert Milton, Gregg Saretsky and Patricia Watson.

As of the date hereof, Elliott has combined economic exposure in the Company of approximately 11.0% of the shares of its Common Stock, $1.00 par value per share (the “Common Stock”), outstanding. As of the date hereof, EIM, the investment manager of Elliott Associates and Elliott International (together, the “Elliott Funds”) with respect to the shares of Common Stock held by the Elliott Funds and/or their respective subsidiaries, beneficially owns 61,116,500 shares of Common Stock. Additionally, as of the date hereof, the Elliott Funds are party to notional principal amount derivative agreements in the form of cash settled swaps with respect to an aggregate of 4,808,000 shares of Common Stock (the “Derivative Agreements”). Elliott Associates, Elliott International and Liverpool are the direct holders of the shares of Common Stock beneficially owned by EIM, and are party to the Derivative Agreements. Liverpool is a wholly-owned subsidiary of Elliott Associates. EIM GP is the sole general partner of EIM. Singer is the sole managing member of EIM GP. As of the date hereof, Mr. Cawley holds 19,765 shares of Common Stock, Mr. Cush holds 10,000 shares of Common Stock, Ms. Feinberg beneficially owns 3,068 shares of Common Stock, including 2,800 shares of Common Stock held directly and 268 shares of Common Stock held by her domestic partner, Mr. Gotbaum holds 19,162 shares of Common Stock, Mr. Milton holds 1,953 shares of Common Stock, Mr. Saretsky holds 4,000 shares of Common Stock and Ms. Watson beneficially owns 5,243 shares of Common Stock, including 3,964 shares of Common Stock held directly and 1,279 shares of Common Stock held by her spouse.

About Elliott

Elliott Investment Management L.P. (together with its affiliates, “Elliott”) manages approximately $69.7 billion of assets as of June 30, 2024. Founded in 1977, it is one of the oldest funds under continuous management. The Elliott funds’ investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, high net worth individuals and families, and employees of the firm. 

Media Contact:        
Casey Friedman                                             
Elliott Investment Management L.P.                                     
(212) 478-1780                                              
cfriedman@elliottmgmt.com

View original content to download multimedia:https://www.prnewswire.com/news-releases/elliott-calls-for-special-meeting-of-shareholders-in-order-to-bring-urgently-needed-change-to-southwest-302275141.html

SOURCE Elliott Investment Management L.P.

Who wouldn’t want to have a $1 million nest egg going into their retirement?

According to a recent CNBC survey, only 16% of respondents said they had that much when they retired — and that was counting all of their assets. But if you want to get there, the easiest way to do it is by setting aside money and investing it in the stock market. You could choose to buy index funds such as those that track the S&P 500 — that strategy is fairly safe over the long term, and ensures you’ll essentially earn returns that match the market.

Or you can build yourself a portfolio of individual stocks — that might get you better returns on your investments, but it’s a choice that comes with more risk of underperforming the market, and of losing money.

If you’re ready to take the risks of that second approach and are looking for tech stocks that could help you become a millionaire in retirement, here are three that I see as having the potential to quadruple in value over the next decade. Without any multiple expansion, doing that would require them to grow their profits by 15% a year — and that’s within their reach. Split a $250,000 investment between them, and growth like that would give you a $1 million portfolio in 2034.

1. ASML

ASML (NASDAQ: ASML) has one of the widest economic moats in the tech sector. It makes the lithography equipment used to manufacture semiconductors, and it’s the only company able to make the most advanced versions of that equipment — extreme ultraviolet (EUV) lithography systems. These, in turn, are the only machines that can make today’s most advanced, component-dense chips.

ASML has built up its technological lead thanks to a generation of research and development, and consistent investments in advancing its technology. At this point, it will be difficult for rivals to catch up. That competitive advantage should help drive ASML’s outperformance in the coming years as demand for its machines is set to grow thanks to AI-driven demand for the most advanced chips.

The company’s market cap is already $332 billion, meaning that if it gains 300% in the next decade, it would have a market cap of $1.33 trillion. And while there are only seven companies on the market today with trillion-dollar valuations, considering the production ramp-up taking place in the semiconductor industry, that goal is within reach for ASML.

In addition, ASML pays a dividend. It’s modest, yielding just 0.8% at the current share price, but reinvesting those payouts could help investors reach their goals a bit quicker.

Story continues

2. Arm Holdings

Arm Holdings (NASDAQ: ARM) is another intriguing tech stock with the potential to help make you a millionaire over the next decade.

Like ASML, Arm has unique competitive advantages that make it a good candidate to ride the AI boom. Unlike most of its chip stock peers, Arm doesn’t design its own chips. Instead, it licenses its technology to companies like Apple and Nvidia, which use its architectures in their chips. Arm’s components are particularly valued in smartphones because they use much less power than competing options like the x86 from Intel and AMD.

That energy-conserving aspect is also making Arm’s products popular with data center operators, as running AI applications demands a tremendous amount of electricity, and savings at scale can be significant.

Finally, Arm generates wide operating margins thanks to its technology and unique business model, and as it rolls out new products and demand for AI soars, it seems likely to benefit. The company looks like a good bet to grow profits by at least 15% annually and retain its lofty earnings multiple.

3. The Trade Desk

The robust growth of digital advertising seems likely to continue as companies shift more of their marketing budgets from conventional advertising to digital channels, and brands seek out new ways to reach customers. One company that’s well positioned to take advantage of that opportunity is The Trade Desk (NASDAQ: TTD), the leading independent demand-side ad tech platform.

The Trade Desk has long outperformed both its ad tech peers and the broader market. And, it should keep capitalizing on the digital ad market’s growth thanks to its new AI platform, Kokai. This product makes it easier for customers to track and measure how their ad campaigns are performing, allowing them to adjust to campaigns in response to customer behavior, and helping advertisers make better decisions.

The Trade Desk has a track record of delivering growth even in periods when advertisers are tightening their belts, and the company should be able to capitalize on new platforms and media channels as they evolve over the next decade. Based on its history, it’s a good bet to quadruple its earnings per share over the next decade.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,266!*

• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,047!*

• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $389,794!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 7, 2024

Jeremy Bowman has positions in The Trade Desk. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Nvidia, and The Trade Desk. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.

Want a $1 Million Nest Egg by Retirement? Invest $250,000 in These 3 Stocks and Wait a Decade. was originally published by The Motley Fool

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