The Panic Buying Peaks and Troughs
In February and March, grocers were jam-packed. Outside, entrance queues ran round the block while inside, shelves were dashed, and brawls were erupting over 24-packs of toilet roll. Now, shelves are fully stocked. There’s air to breathe, and body armour isn’t needed for a visit Walmart!
This is the calm after the storm, good news for most people, but not for investors in supermarkets and food makers. The Invstr community has been bullish of late, but stocks like McCormick and Tyson Foods haven’t kept pace with the re-ratings in sentiment awarded to the wider market. Analysts figure less panic buying is the cause.
Mary Ledman, Rabobank’s global dairy strategist, says milkers in Wisconsin are being asked to dump their produce in the dirt to support prices. Whereas before there were bulk buyers, supply now exceeds demand. “You had this initial strong retail market, but then everyone stocked their fridges, and it’s reversed.” We’re back to our standard purchasing patterns!
Some investors are pitching supermarket short ideas, very contrarian! They say social distancing has changed the shopping experience for the worse. Retailers like Costco and Walmart are limiting visitors per store, and that means a slower flow of same-store sales.
The positive catalysts ahead for investors in this sector could be extensions to lockdowns. If the public is told to hunker down for another month, superstores could see another surge in panic buying as current home stocks risk running thin. We’re not out of the wood yet, and we’re not sure how long it takes to get through a 24-pack of bog roll, you?
