10 Food Stocks That Could Rise

NEW YORK ( Karvy Global) -- Food scarcity remains a major concern around the global, and food inflation rates are increasing despite improved production levels. Changing weather patterns in several countries could further exacerbate food shortages going forward. Arable land is shrinking in emerging economies due to industrialization, soil degradation, crop failures and booming populations, and this could trigger unprecedented food price hikes.

The demand-supply mismatch will likely support higher agricultural commodity prices going forward. Given the run-up in food prices and the positive momentum in equity markets, food stocks will likely provide investors with attractive returns during 2011.

Analysts expect these 10 stocks to outperform their peers and broader markets, based on the upside implied from their respective price targets for 2011. On average, analysts expect these stocks to have gains ranging from 28% to 136% over the next 12 months.

In comparison, Kraft Foods ( KFT), Monsanto ( MON), General Mills ( GIS), Archer Daniels Midland ( ADM), and Kellogg ( K) have expected upside in the range of 3%-12%.

The charts that precede each stock show the stock's performance, as well as the performance of the S&P 500 (identifed as "INX").

No. 10: Origin Agritech ( SEED)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

China's Origin Agritech is a technology-focused company engaged in research, development, production, sale and distribution of crop seeds.

Last week, the company said it expected fiscal 2011 revenue in the range of 600 million to 650 million yuan, vs. 584 million yuan reported for fiscal 2010. Meanwhile, analysts polled by Bloomberg expect the company to report earnings of 47 cents for fiscal year 2011 and 49 cents for 2012, vs. earnings of 31 cents per share for 2010.

Of the three analysts covering the stock, two recommend buying it and one gives it a hold rating.

On average, analysts expect the stock to gain around 28% over the next 12 months, to $13.

No. 9: Feihe International ( ADY)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

China's Feihe International produces and distributes premium infant formula, milk powder, soybean, rice and walnut products in China.

For the fourth quarter of 2010, analysts polled by Bloomberg expect the company to report earnings of 7 cents per share, compared with a loss of $1.34 per share in the year-ago period. For all of 2010, analysts expect Feihe to report a loss of 50 cents. However, the company is expected to turn profitable in 2011 with earnings per share of 67 cents in 2011 and 97 cents in 2012.

On average, analysts expect the stock to gain 30% over the next 12 months. The consensus target price is $13.00, according to analysts polled by Bloomberg. In comparison, Synutra International ( SYUT), Dean Foods ( DF) and Wimm-Bill-Dann Foods ( WBD) are expected to return around 33%, -9% and -7%, respectively.

Of the four analysts covering the stock, one recommends buying it, two give it a hold rating and one rates it a sell.

No. 8: Zhongpin ( HOGS)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

China's Zhongpin produces and distributes pork, processed meat products and vegetables.

Analysts polled by Bloomberg expect the company to report earnings of 46 cents per share during the fourth quarter of 2010, compared with earnings of 34 cents per share a year ago and 42 cents per share in the previous quarter. The company is expected to report earnings per share of $1.61 cents for 2010, $1.97 for 2011 and $2.36 for 2012, in comparison with earnings of $1.46 per share for 2009.

The stock surged around 47% during the past year, while Hormel Foods ( TSN), Tyson Foods ( TSN) and Smithfield Foods ( SFD) posted gains of around 30%, 20% and 29%, respectively.

The stock is currently trading at a forward price-to-earnings ratio of 11.7 and an enterprise value-to-EBITDA ratio of 11.1.

Of the nine analysts covering the stock, seven recommend buying it and two give it a hold rating. Analysts expect the stock to gain about 31% over the next 12 months, with a consensus target price of $24.6.

No. 7: Cosan ( CZZ)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Cosan produces ethanol and sugar, markets and distributes fuel and lubricants in Brazil and provides logistics services in the state of Sao Paulo.

For the quarter ended Dec. 31, 2010, analysts polled by Bloomberg expect the company to report earnings of 40 cents per share, up from earnings of 28 cents a share reported during the previous quarter.

The stock surged around 62% during the past year, while Seaboard ( SEB), Archer Daniels Midland and Imperial Sugar ( IPSU) reported returns of 68%, 12% and -25%, respectively.

Cosan is currently trading at a forward price-to-earnings ratio of 15.6 and an enterprise value-to-EBITDA ratio of 6.1.

Of the nine analysts covering the stock, eight recommend buying it, and one gives it a hold recommendation. Analysts expect the stock to gain around 40% over the next 12 months with a consensus target price of $18.70.

No. 6: China Nutrifruit Group ( CNGL)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

China Nutrifruit Group produces, markets and distributes a variety of food products.

For its second fiscal quarter of 2011, which ended Sept. 30, the company reported 20% year-over-year growth in net sales and 14% year-over-year growth in operating earnings.

Commenting on the business outlook for the second half of fiscal 2011, Changjun Yu, Chairman and CEO of China Nutrifruit, said in a press release:
"In the second half of fiscal year 2011, we anticipate our new fruit and vegetable powder line to contribute to our sales momentum. We are actively expanding our research efforts to introduce new fruit and vegetable powder products which will further diversify our product portfolio. Our growth strategy includes capacity expansion and increased market penetration to enhance our revenue growth and gain increased market share in China and in the overseas market."

Analysts polled by Bloomberg expect the company to report earnings of 13 cents per share for the quarter ended Dec. 31, 2010, compared with earnings of 11 cents per share in the year-ago period. Analysts foresee the company reporting earnings per share of 56 cents for fiscal 2011, up from 51 cents per share a year earlier.

At $2.88, the stock is trading at an attractive price-to-earnings ratio of 5.1. In comparison H.J. Heinz ( HNZ), Smart Balance ( SMBL) and SkyPeople Fruit Juice ( SPU) are trading at P/Es of 15.9, 37.8, and 5.2, respectively. In addition, China Nutrifruit's EV-to-EBITDA ratio of 3.0 is well below its competitors.

Analysts expect the stock to gain around 74% over the next 12 months with a target price of $5.00.

No. 5: Yuhe International ( YUII)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Yuhe International is a supplier of chicken meat in China.

Analysts polled by Bloomberg expect the company to report earnings of 35 cents per share for the fourth quarter of 2010, compared with earnings of 23 cents per share in the year-ago period. The company is expected to report earnings per share of $1.21 for 2010, $1.67 for 2011 and $2.84 for 2012, compared with earnings of 81 cents per share for 2009.

The return-on-equity during the past 12 months has been 26.4%, surpassing competitors. Tyson Foods, Pilgrim's Pride ( PPC), Industrias Bachoco ( IBA), Sanderson Farms ( SAFM) and Cal-Maine Foods ( CALM) have ROEs of 16.3%, -60.3%, 5.6%, 25.0% and 19.1%, respectively.

The stock is currently trading at an attractive forward price-to-earnings ratio of 8.7 and an EV-to-EBITDA ratio of 7.3.

All four analysts covering the stock recommend buying it. On average, they foresee the stock gaining around 76% to $16.70 over the next 12 months.

No. 4: Yongye International ( YONG)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

China's Yongye researches, develops, produces and sells fulvic acid-based liquids and power nutrients for plant fertilizer and animal feed.

For the fourth quarter of 2010, analysts polled by Bloomberg expect the company to report earnings of 3 cents per share, as opposed to a loss of 3 cents reported in the year-ago period. Analysts expect the company to report earnings per share of $1.07 for 2010, $1.42 for 2011 and $2.04 for 2012, a significant improvement from earnings of 7 cents per share for 2009.

On average, analysts polled by Bloomberg expect the stock to gain 99% over the next 12 months to $14.7. On the other hand, Syngenta ( SYT), American Vanguard ( AVD), and China Green Agriculture ( CGA) are expected to return around 0.4%, -4% and -10%, respectively.

The stock is currently trading at an attractive forward price-to-earnings ratio of 6.8 and an EV-to-EBITDA ratio of 5.9.

Of the five analysts covering the stock, four have buy recommendations and one has a hold rating.

No. 3: American Lorain ( ALN)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

American Lorain is an integrated food company engaged in the development, manufacturing and sale of processed food products worldwide.

Analysts polled by Bloomberg expect the company to report earnings of 30 cents per share for the fourth quarter of 2010, compared with earnings of 24 cents per share a year ago and 16 cents per share in the previous quarter, respectively. Analysts foresee the company reporting earnings per share of 65 cents for 2010, 72 cents for 2011 and 90 cents for 2012, in comparison with earnings of 55 cents per share for 2009.

According to the average analyst estimate from Bloomberg, the stock could gain 118% over the next 12 months, to $5.75, whereas China Nutrifruit Group ( CNGL) and Omega Protein ( OME) have expected upside of 74% and 24%, respectively.

All four analysts covering the stock have buy ratings on it. The stock is currently trading at an attractive forward P/E of 4.1 and an EV-to-EBITDA ratio of 4.1.

No. 2: China Marine Food Group ( CMFO)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

China Marine Food Group processes, distributes, and markets fresh fish and processed seafood-based snack products.

Analysts polled by Bloomberg expect the company to report earnings of 20 cents per share for the fourth quarter of 2010, compared with earnings of 18 cents per share one year ago and 14 cents per share in the previous quarter. For the full year, analysts foresee the company reporting earnings per share of 77 cents for 2010 and $1.00 for 2011, up from earnings of 60 cents per share for 2009.

During the past 12 months, the return-on-equity has been 27.8%, beating competitors. Zhongpin, Monsanto, Andersons ( ANDE), Alico ( ALCO) and Limoneira ( LMNR) have ROEs of 18.7%, 11.0%, 10.3%, -0.6% and -6.2%, respectively.

The stock is currently trading at an attractive forward P/E of 5.1 and an EV-to-EBITDA ratio of 3.7.

The three analysts covering the stock recommend buying it. On average, they expect the stock to gain around 127% over the next 12 months to $9.50.

No. 1: AgFeed Industries ( FEED)

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

China's AgFeed Industries is engaged in animal nutrition and commercial hog production in China.

Analysts polled by Bloomberg expect the company to report earnings of 2 cents per share for the fourth quarter of 2010, vs. the loss of 43 cents per share in the quarter-ago period. For all of 2010, analysts expect the company to report a loss of 45 cents per share. However, the company is expected to turn profitable in 2011 with earnings per share of 49 cents in 2011 and $1.05 in 2012.

Analysts predict the stock will rise 136% over the next 12 months to $6.00, whereas analysts expect Bunge ( BG), Smithfield Foods and Westway Group ( WWAY) to rise 3%, 12% and 22%, respectively.

>To see these stocks in action, visit the 10 Food Stocks portfolio on Stockpickr.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

More from Opinion

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

7 Takeaways From Google's $550-Million Investment in Alibaba Rival JD.com

7 Takeaways From Google's $550-Million Investment in Alibaba Rival JD.com

It's Just Not Smart For Investors to Ignore the Threat of a Trade War

It's Just Not Smart For Investors to Ignore the Threat of a Trade War

To Think a Trade War's Still Just a Threat Is the Dumbest Thing on Wall Street

To Think a Trade War's Still Just a Threat Is the Dumbest Thing on Wall Street

Flashback Friday in Politics: Trade Wars, Manafort, Immigration Dominate Minds

Flashback Friday in Politics: Trade Wars, Manafort, Immigration Dominate Minds