The market continued its recent selloff today as the S&P 500 plunged below the May low like a hot knife in butter, falling more than -3% to its lowest level since March last year. The selling intensified in the afternoon and if we close at these levels, it will send the S&P 500 into an official bear market.
The VIX index climbs more than 18%, pushing the “fear gauge” near its highest level in more than a month. Last year, moderate spikes in volatility represented good buying opportunities as a “buy down” strategy performed well. But this year it’s a different story, as volatility has been the only constant. Volatility is here to stay, so it’s all about targeting the right sectors and industry groups when choosing the optimal investments for your portfolio.
Two defensive sectors that tend to outperform during market downturns are Consumer Staples and Utilities, and we see this playing out right now with both groups doing considerably better than the major indices. This year.
Below, we’ll analyze a consumer staples company that pulls off a series of 52-week highs while most stocks are in bearish territory. This company is part of the Zacks Food – Meat Products industry, which currently ranks in the top 6% out of approximately 250 Zacks-ranked industries. Investing in the best performing industry groups provides a constant tailwind to our investment success. Also note favorable features for this industry below:
Image source: Zacks Investment Research
Sanderson Farms, Inc. (SAFM – Free report)
Sanderson Farms is an integrated poultry processing company engaged in the production, marketing and distribution of fresh, frozen and minimally prepared chicken. The Company’s product line includes community and consumer packaged chicken products for foodservice establishments and distributors. Founded in 1947 and based in Laurel, MS, SAFM operates 11 hatcheries, 9 feed plants, 12 processing plants and 1 prepared chicken plant.
At Zacks Rank #1 (Strong Buy), SAFM easily beat earnings expectations in the latest quarterly announcement. The company posted EPS of $14.39/share against the Zacks consensus estimate of $6.81 – a surprise 111.31%. SAFM benefited from strong second-quarter execution in live production, sales and processing, as revenue and net income increased year-on-year. Higher demand and higher prices for food products sold to retail grocery customers boosted quarterly results.
SAFM has exceeded earnings estimates in each of the past four quarters. The company is undervalued (5.01 forward PER) relative to its industry (9.34) and has generated an average positive earnings surprise of 60.49% over the past four quarters. The stock price has followed suit, rising more than 23% in the past year.