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Food And Beverage ETFs
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About Food And Beverage ETFs |
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Food and Beverage ETFs overview
The food and Beverage ETFs aren't the big heavy hitters on the investment fund scene, at least, not yet. Ironically, food is now being seen as one of the big future investment markets. You wouldn't guess that, looking at the food and beverage index, which is a mix of results and indicators.
The index isn't much help as an indicator of investment values. It has however shown some dynamism missing from other sectors. The food sector investment portfolios took as big a hit from the market meltdown as any of the other sectors, but they've also been bouncing back faster.
In ETF terms, investment options are limited, and the trading volumes are at this point lower than in other sectors. This really is an emerging investment market, and behavior and performance aren't clearly established. The better analogy would be the Food and Beverage indexes, rather than the ETFs themselves.
That said, food and beverage corporations have been slugged by a range of factors, not least of which has been the downturn in employment, which has been hitting outlays on higher end products. This is the inevitable result of defensive household budgets, and the food industry couldn't dodge that bullet.
However, the food industry has a few offsets that other sectors could only dream about. The fast food industry, for example, the ?alternative food supply?, did well out of the initial big hit from the reduction in incomes. So did the fast food supply chain. These companies benefited greatly from sudden increase in demand.
As a lesson in gut level economics, that result will be talked about for years to come, and it emphasizes the depth of the food industry in investment terms. In the first 3 months of 2009, a turnaround is well underway, with a return to positive territory.
Short term (2 months)
Unlike the other sectors, Food And Beverages stock prices seems to be able to respond rapidly, and the sector isn't directly being hit by other market factors, like freight, etc. Short term ETF increases are therefore a reasonable proposition, and in some cases, trading values may also be worth consideration on the basis of this obvious capacity for upside.
It would be unwise, however, to discount market volatility. The food investments do have exposure to the movement of capital repositioning itself. Even if the Food And Beverages are considered a safe haven, they're also a piggy bank for moving capital.
Medium term (2 years)
Food is considered a safe investment, traditionally, but now it's getting a reputation among aficionados as a genuine commodity-scale, big time, investment option. This will translate over time into a Next Big Thing, but at the moment it's a boutique-style investment option.
The obvious criteria for elevation to major league status for the Food And Beverage ETFs is the entry of big capital investment. That isn't going to happen overnight, and the return of big capital and institutional investments will take roughly 2 years to generate the sort of returns ETF investors like to see.
Long term (5 years)
It's a fair expectation that in 5 years, with the movement of capital returning to former levels, that Food And Beverages will be attracting big money. Market analyses, pre and post meltdown, were looking hard at investment strategies and emerging trends. The basic criteria were to look for economic indicators of investment potentials, and food was the common finding among analyses.
This was a demand based finding, and it reflected a range of factors from production failures, droughts, as well as the basic demand scenarios. Population growth, increased disposable income among developing nations, and price factors were also considered. The general consensus is that food is the big issue of the 21st century, as well as the big investment move.
Qualifiers to projections
It should be understood that the status of Next Big Thing, in the investment market, isn't necessarily a good or a bad thing. From the ETFs perspective, it can mean both volatility, on a scale not seen before. That may bode well for investors, as the net asset values of the ETFs improve, overall.
On the corporate basis, the index can be expected to pick up some weight and some speed from a recovery in a hurry. On a trading basis, however, it also means that the Food And Beverages ETFs will be moving into day trader territory, which means market margin trading will be the law of gravity for performance.
In a true recovery, the Food And Beverages index will do well from the increased interest from capital investors. In choppy economic waters, however, it could generate a bumpy ride as the market's centrifugal forces go to work on bottom lines. It is just possible that Food And Beverages could be one of the sectors which can avoid a deflationary scenario. That may be an unrecognized value in the index, but it'd require confirmation.
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Last Updated on: 2010-01-14 02:03:40 |
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