Hedge fund investors and money managers across Wall Street are said to be favouring the food sector over the Treasury bond market.
According to Buzzfeed, as US Treasury yields are approaching historic lows, (fetching a mere two percent for a 10 year bond) food sector stocks are offering a far more attractive alternative with relatively low risk and better yields than government bonds.
Investors see attractive growth in the sector as it consists of inelastic products which seldom exhibit negative fluctuations in demand.
“The food sector offers everything that a big money manager needs,” said one hedge fund industry observer. “There are dividends, liquidity, upside possibility and downside protection. These managers are using it almost as a proxy for convertible bonds.”
Industry is saying that investors are seeking well known, safe names such as Kellogg’s, Heniz and General Mills, because if or when the market drops, people will still “have to eat.”
The Kellogg Company has gained almost 50 percent over the last year equating to $64 per share, and Heinz has attracted the interest of billionaire Warren Buffett, with a $23 b deal currently in the works to purchase the iconic ketchup company.
Industry sources are claiming that although the food sector demonstrates less risk and greater profit potential than bonds, the increased investment in the sector is largely a result of defensive posturing rather than a potential alternative to bonds.