Food for thought: investing in the future of food

Professional investor Stéphane Soussan picks three stocks that can help feed the world's rapidly growing population and hand investors a satisfying return.

Each week, aprofessional investor tells us where he'd put his money. This week: Stphane Soussan of CPR Asset Management's Invest Food for Generations.

The United Nations forecasts that the world's population will reach a staggering 9.7 billion by 2050, up from around 8.5 billion in 2030 and 7.3 billion today. A rapidly growing global population is one megatrend investors can profit from; two related ones are urbanisation and increasing demand for resources. Investors can capitalise on structural change of this kind while also contributing to the vital task of providing enough food and water for everyone on the planet.

Investing in innovative new products and technologies across the food value chain will help transform industries such as agriculture, water and food retail so that they can sustainably produce more food with fewer resources. Including companies that can contribute to the transformation of the food value chain in your portfolio could boost your long-term returns significantly.

Sustainable and renewable

One company that has invested heavily in sustainable and renewable products is DSM (Amsterdam: DSM), a multinational focused on nutrition, health and sustainable living. A world leader in the production of vitamins, DSM is at the core of the health and wellness trend. The group has been investing in innovative nutritional products including the production of omega-three nutrients made from algae. Margins are expected to increase thanks to a dynamic new product mix and the company is well positioned to see its earnings-per-share achieve double-digit growth.

Investing in the theme of food does not mean opting only for agricultural and restaurant stocks. Reflecting CPR Asset Management's multi-sector approach, our second stock offering exposure to the food theme is Canadian Pacific Railway (NYSE: CP/Toronto: CP), one of two railways in Canada. Canada's agricultural sector has been growing rapidly, and with 35% of the railway's business linked to grains, forest products and fertilisers, CP has capitalised on Canada's expanding agriculture and forestry industries.

Proven pricing power

With only one competitor, pricing power has proved strong over the last few years. The company's cost-cutting and efficiency measures should drive margin improvement, which, combined with material revenue growth, means CP offers a compelling investment case. Finally, we value stocks that can capitalise on developing trends across different geographies.

Exposure to emerging markets

That brings us to Danone (Paris: BN), the leading global dairy products company. It has been diversifying its portfolio to include plant-based food and beverages in response to changing consumption patterns notably the rise of veganism and appetite for environmentally friendly products.

Danone also has significant exposure to emerging markets, which have seen an uptake in demand for animal protein, driven by rising income. China's phasing out of its one-child policy over the past few years is also expected to have a positive long-term impact on the company's infant-formula product range.

Recommended

Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
19 Feb 2021
Get decades of growth at a discount with this healthcare investment trust
Investment trusts

Get decades of growth at a discount with this healthcare investment trust

Healthcare is set for strong long-term expansion but looks cheap. That makes this investment trust worth buying, says Max King.
19 Apr 2021
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
16 Apr 2021
Four investment trusts for income investors to buy now
Investment trusts

Four investment trusts for income investors to buy now

Some high-yielding listed lending funds have come through the crisis with flying colours. David Stevenson picks four of the best.
12 Apr 2021

Most Popular

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?
Bitcoin

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?

Dogecoin – a cryptocurrency created as a joke – has risen by more than 9,000% this year alone. Saloni Sardana looks at how something that began as an …
19 Apr 2021
The FTSE 100 has clawed back above 7,000 – how much higher can it go?
UK stockmarkets

The FTSE 100 has clawed back above 7,000 – how much higher can it go?

The FTSE 100 index has risen to over 7,000 for the first time in over a year – it now sits just above where it was in 1999. But its era of neglect cou…
19 Apr 2021
The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021