 Good day fellow investors. I've recently started to research a new sector and that is the food sector because it's very interesting there are some strong trends there will be more people so let's see what and what are the potential investments and whether there is something to invest in. The topics for today the food tailwind because of what's going on in the world more people businesses are already profitable and established when compared to other things I don't know with big price to sales ratios there are dividends there are positive earnings buyback so there is a margin of safety in the industry what will happen is relatively predictable you're going to eat tomorrow there are modes with high barriers to entry from logistics scale legacy we have 200 year old businesses that we can buy and then also we will discuss bungee stock at the end that will give you a perspective on what are the opportunities how does it look like and what you can expect when we dig more into the sector so just a quick comparison to what is there I borrowed this chart from Justin Swiertek that just wrote an article on a software as a service company ESTC and I'm looking at this chart price to sales on average what will be around 15 so companies are selling at price to sales of 15 so I don't think in such a sector there is a margin of safety there is practically no book value and everybody hopes to get to the next I don't know Microsoft or something like that so very risky from my perspective and I will never buy something like this because it doesn't have a mode some new players can come in take your mode etc so it is some people will make a lot of money on these stocks and stocks like this but it is very very risky and the risk of permanent loss is very high with food stocks on the other hand the risks are much lower because of the better fundamentals so how do I research a sector I'm not just throwing my money okay people are going to eat more let's buy everything there is what I like to do is always take a list I have a list of nasdaq stocks international this is just a list of new york stock exchange traded food stocks and there are some quick things that I found and I would like to share with you over the first round of research that I did first thing is there is a lot of consolidation a lot of merger and acquisitions so six out of the 40 businesses on my list have been taken over just among those traded in the new york stock exchange over the last few years so consolidation means two things a young market the growing market or also an aging market in this case is the latter where companies like Campbell's soup Kraft Heinz to Tzerol and are finding it difficult to grow so they force themselves into expensive acquisitions that are usually poorer location of capital the second thing I found is that brand strength is declining and people look for new different things this leads to declining sales and many value traps one example that I discussed before is the Kraft Heinz stock decline and their weaknesses in the brands and the change in consumer preferences especially millennial in millennials number three it is not easy to find a business that is really getting traction in the new trends as those change quickly but when you look at 100 stocks there are always one or two that are or that might be interesting so there will be something to watch from this we later discuss banji which is an interesting stock and I'll just share my preliminary research with you so what are the tailwinds in the food sector the decreasing availability of land anticipated increasing commodity prices over the long term due to finite resources and the growing increasingly went wealthy population more meat consumption so there is a shift towards meat based diets increasing the need for grain based feeds the creation of markets in farm related carbon credits and water rights the increasing levels of investment by land poor and food deficient countries attempting to protect food supplies and the increase of value of farmland now I don't know why but I'm not fully convinced of these tailwinds I look at food prices and I see them go down or I see them going down over the last tenish years over the last decade so if we look at the chart we see food prices declining from the 1970s till 2000 then we had a spike in the 2000s as China came in became a great importer of food as emerging markets started growing but since then high level of investments and again declining food prices so it's not really that food prices are going just up and up which is also a good thing because there is less starvation and less people die so when it comes to investing again it all boils down to value investing when you find in those cycles as you can see food prices go up and down so that reflects earnings and that reflects analysts and estimation over the next few years and when you can understand the cycle understand where the prices will be on average over the long term buy when everybody is pessimistic and sell all hold when everybody is optimistic then you make great returns and you can add great businesses to your portfolio but you have to be patient and patience is rewarding because you later see how those stock prices are also extremely volatile even if not much changes in the business let's just discuss bg stock is a food trader and processor grain soy corn with some other adjacent businesses and as many are waiting for a stock market crash to buy things on the cheap well you have one here bungee stock price is down 43 percent over the last five years it was 80 just a few years ago just a year ago and now it is 52 the business is 200 years old has been constantly rewarding investors over the last 10 years 50 percent of the current market cap has been returned to investors through buybacks the dividend is also constantly growing so it's dividend growth stock the business model is focused on increased volumes of food trade and processing so they expect to crush more soy and as food prices are volatile as volumes are volatile so is bg's cash flow too and we can see that when things are good they increase the repurchases and when things are not that good they cut on the repurchases and they deploy their cash flows in other places so a few years ago they did a lot of repurchases then nothing and prior to that again repurchases in the last two years they didn't do any repurchases but they constantly increase those dividends as the cash flows is there so a very interesting story on top of that there have been rumors that glancor or archer daniels midlands will acquire bg when the stock was 80 just a year ago and as this thing takes time perhaps it will push the stock price up in the short term but what i still have to do is compare with adm wilmar traded on the singapore stock exchange make models understand what can happen are we at the bottom and if we are at the bottom i might even buy because the downside will be limited the upside you never know so that's how i invest and you can expect more about more food stocks there are some other interesting that i already found i'll share with you my ideas what i found that perhaps you will find something interesting for you to conclude on the general food sector i think there is a long-term trend but i wouldn't i really need to focus on the business first and then if there is the positivity from the trend just accept it as a free gift because that's how value investing is you don't just invest in something because it will happen you look at the valuation you look at what am i buying now what will be the average business yield if things don't change or if things go to the worst you're looking for a margin of safety and only then you invest so keep watching subscribe there will be more stock analysis and i'm looking forward to your comments and i'll see you in the next video