Several years ago, the idea of vegan stocks may have been laughable. We’re Americans and in America, we eat meat…real meat. That might have been the prevailing attitude and in some regions perhaps, that’s still the case. Nevertheless, thanks to the emerging Generation Z, a food paradigm might be shifting soon.
Here are a few facts to consider. First, according to the website Medical Inspiration Daily For Stronger Society (MIDSS), its poll of 3,000 Gen Z individuals (defined as people born between 1997 to 2012) represents the main driver of the U.S. vegan market. Indeed, a whopping 70% identify as vegan and state that they will continue to pursue the diet in the next five years.
Second, vegan stocks may benefit from broader growth projections. Per Coherent Market Insights, the global vegan food market reached a valuation of about $16.53 billion in 2022. Experts project that the segment may expand at a compound annual growth rate (CAGR) of 8.8% between 2023 and 2030. Even if you doubt the previous 70% figure, a CAGR of 8.8% appears both realistic and significant.
Given that young people generally care about sustainability, the idea that vegan stocks would flourish isn’t particularly surprising. With that, below are some compelling ideas to consider.
Packaging Corp of America (PKG)
Yes, I’m well aware that Packaging Corp of America (NYSE:PKG) is not a pure-play example of vegan stocks. As the name suggests, the company is a packaging specialist, focusing on the sometimes overlooked component of the food industry’s value chain: making sure that the underlying products get from farm to table safely and securely.
More importantly, when it comes to vegan stocks, the emphasis centers on a holistic directive. We’re not talking about folks who are focused on sustainable eating, only to not give two cents about their impact in other areas. As Packaging’s website states, demand for recycled content and recyclable materials in fresh produce packaging has only increased.
Ultimately, it’s about giving consumers what they want, which makes PKG a relevant component in the vegan revolution. And to be sure, Packaging offers a relatively sensible financial profile, enjoying consistent annual profitability. Lastly, analysts rate shares a moderate buy with a max-side target of $187.
Another idea among vegan stocks that’s not exactly a pure-play idea, Kroger (NYSE:KR) is, however, more than tangentially related to the sustainability movement. Per its website, Kroger features multiple environmental, social and governance (ESG) protocols. This includes its “Zero Hunger | Zero Waste” initiative ultimately aiming to eliminate hunger in underprivileged communities.
As for vegan stocks, Kroger features its in-store Simple Truth brand. Taking a cue from the rise in demand for plant-based products, Kroger offers a range of diary and animal-protein-free products. As well, the brand delivers multiple organic and gluten-free, high-quality food items for consumers who care about what they put in their body. And the latest market stats indicate that Gen Z cares a lot.
As for the financials, I’ve stated many times that Kroger is undervalued. Priced at 10.71X forward earnings, I think it’s an idea to consider. Also, analysts peg shares a moderate buy with a $51 price target, implying almost 11% upside potential.
Beyond Meat (BYND)
Okay, folks – feel free to call me out on social media for my chaotic assessments of Beyond Meat (NASDAQ:BYND). I’ll take the criticisms. But in my defense, I still think it’s a high-risk venture. Nevertheless, certain datapoints indicate the very real possibility of a short squeeze. Perhaps a football analogy may help.
When I say BYND may be one of the vegan stocks to consider, I’m not saying the Cleveland Browns will win the Super Bowl. But would it be fair to say they’ll score some points? Absolutely. So, at some point, if the bookie gives you compelling enough odds, you might be tempted to take the contrarian wager. That’s exactly what’s going on with BYND.
You see, the bookies in this case are the short sellers. In the open market, BYND posts a short interest of 39.55% of its float (with 11 days to cover). In the derivatives market, institutional bears appear to have sold call options.
Again, I don’t think the Browns of Wall Street are going to win the big one. But they probably will score a touchdown or two.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.