Plant Based Stocks have been IPO’ing left and right this year. It will be a hot trend and should be included in ESG investing. Many of the young generation are switching to plant based diets based on the environmental impact of raising cattle and such. There has been a Netflix documentary (or a few) detailing this, as well as the stress on water resources. With the middle class in Asia rising, it means demand for protein will be increasing. Plant based proteins and tofu might be just the thing the planet needs for the future.
It all really started with this:
Beyond Meat is what began putting plant based companies on investor’s radars. The stock IPO’d with a lot of anticipation and fanfare. The stock performed well in its first few months. After hitting a peak close to $240, the stock is now trading under $70.
Oatly is another stock in the plant based sector which was the talk of the street. After an initial good four weeks, we have now begun drifting lower. I recently came upon Oatly after finding out it is the largest position in VanEck’s new Future of Food ETF YUMY. You can read about that here. VanEck also sees plant based foods as a solution to address climate issues which come from a rising middle class and a larger human population.
A few things I want to point out about the plant based sector. Firstly, the food itself tastes good. I think this is important because people who are not Vegan or Vegetarian are now opting for plant based foods because they taste good, are healthy, and I suspect, they feel they are doing their part to save the earth. With this demand and trend, plant based/vegan options are pretty much in every restaurant now. I went to Pizza Pizza recently, and they even have plant based chicken burgers and plant based chicken bites!
What this means is that there is a LOT of competition now. Plant based companies really have to distinguish themselves and their product, or hit a specific niche.
If you checked out our Investor’s Roundtable on this topic, a lot of us feel that many of these companies will feel the pinch. Due to all the competition, revenues could be a challenge, and many of these companies will just die off.
Let’s take a look at a variety of companies in the plant based sector.
Organic Garage (OG.V)
Organic Garage Ltd. owns and operates grocery stores that sell natural and organic products to consumers in Canada. The company offers produce, dairy, bakery, bulk, grocery, meat, frozen, and prepared foods; and health and beauty products, as well as vitamins and supplements. It operates five stores in the Greater Toronto Area. More stores are opening, and the company recently acquired the Future of Cheese.
I’ll be honest, I live in an area on the West Coast of Canada where there are tons of pure organic super markets. You can get everything there: food, produce, supplements, household products etc. A bit pricier? Yes. But always packed. Consumers are spending those extra dollars to ensure they buy healthy and organic stuff. I expect this trend to continue and get stronger. Saying that, I expect the big supermarkets like Loblaws and Wal-Mart to change with the times. Superstore already has two aisles of plant based and organic food and supplements. Consumers might just say it is more convenient, and cheaper, to do their shopping there. I like the idea of pure natural and organic super markets, and I continue to do my shopping there, but there is just so much competition not just from the bug boys, but from smaller private companies jumping on this trend.
The stock itself has had a nice year. Just a few months ago, we had a nice 70% rally after breaking out above $0.40. We took out resistance at $0.55 so the stock looked even more bullish. However, on the retest, we did not hold, and broke back below. A false breakout. That took the stock back down to $0.40 which now remains our key support zone. To the upside, $0.55. Very simple on this one. Wait for the candle close on either side of support or resistance. Of course, we are hoping for a break and close above $0.55. The stock is still technically in an uptrend while it stays above $0.40. Catalysts include the expansion of stores, and sales regarding the Future of Cheese products.
Freshii Inc. develops, franchises, and operates quick-serve restaurants in Canada, the United States, and internationally. Its restaurants offer salads, bowls, burritos, wraps, soups, juices, smoothies, frozen yogurt, drinks, snacks, breakfast, and products for kids.
It may come as a surprise to a few people that the stock is traded. What I can say about this stock is this: I would prefer eating at the store rather than owning the stock.
The stock really hasn’t done anything since February of this year. We are just ranging, with price currently at the bottom portion of the range. But longer term, this company used to be trading at $15.00, now it is below $2.00. Personally, I think Freshii had the advantage earlier with their healthy food options, but now there is just too much competition.
The company recently put out some earnings, highlights were:
Strong digital sales momentum, with Freshii mobile app sales up 129% vs Q1 2020 and total North American traditional restaurant digital sales mix up to over 40% of total sales vs 20% in Q1 2020
Completes North American in-app delivery functionality rollout
24 more locations open and operating at end of Q1 2021 vs Q4 2020
Continued investment to support franchise partners as COVID-19 restrictions persist in major markets
Adds new direct to consumer digital sales channel to apple cider vinegar gummy supplement offering
CPG business enhances in-store branding and expands product line and distribution
The stock continues to hold the range between $1.90-$2.20. We did break above $2.20 when earnings came out, but no momentum further. Not too bullish and the market was not too impressed with the earnings numbers and forward guidance.
Nexe Innovations (NEXE.V)
NEXE Innovations Inc. designs, develops, manufactures, and sells plant-based single-serve coffee pods for use in single-serve coffee machines. Their Nexe pod is out for sale and can be used with Keurig and Nespresso machines. Their coffee pod is fully compostable in as little as 35 days.
Coffee pods are something most of us think little about. I mean they are everywhere. Offices, car dealerships etc you name it. But we don’t really ask what happens to all those coffee pods we use on a daily basis? I own a Nespresso machine, and Nespresso has begun a campaign to recycle their pods. The thing is I either have to put my used pods in a black bag and return it to the store, or put it in a red bag and mail it in. I mean sure I don’t mind, but there isn’t a rewards program or what not. I know some hardcore environmentalists probably hate my guts right now.
Honestly, Nexe serves a very particular niche. This is a company that has laid down a lot of money on research and design, and it is one I will follow.
It hasn’t been fun holding the stock for the long term. very long down trend. But we may have found a bottom at $0.60. The company’s products have recently launched, so the stock is garnering more attention. We had a very nice pop at $0.60 with three days of green action. A pop of nearly 95% in three days. Not too bad. But unfortunately, no momentum follow through. We should have expected that with the amount of volume.
The stock seems destined to retest the $0.60 support again. If it holds, perhaps we are forming a double bottom, and then we have a range to work with with $0.60 being support and $1.10 being resistance. If it doesn’t hold, then new record lows are being printed, and we would be looking at $0.50 for the next support zone.
Nabati Foods Global (MEAL.CN)
Nabati Foods Global Inc. designs, develops, produces, distributes, and sells various plant-based meat and other food alternatives in Canada and the United States. The company offers desserts, dairy alternatives, and meat alternatives through distribution partners and e-commerce sites. It provides dairy-free cheesecakes, cheese shreds, and plant-based burgers, including beef alternatives, chicken alternatives, fish alternatives, and ground beef alternatives, as well as plant-based liquid egg alternatives.
The company has an assortment of products which can be found at retailers such as CostcoGrocery.
Again, my thinking is there might just be too much competition in this space. I do like the Nabati Plant Eggz. I think that is super innovative and addresses an important protein need. I am a vegetarian, and I will be trying this product out for sure. For those that know, the protein struggle can be real. Really is tofu, broccoli and protein powder.
For Nabati, I will be waiting for some earnings releases. One has already come out, but the company is still relatively new so I want to see a few more numbers for a consistent summary and analysis.
After a great IPO run, the stock has given up those gains and more, taking out IPO lows. We have formed new record lows at $0.475, where we currently are sitting. Notice I have drawn a box around the current price action candles. There is a chance that we are finding a bottom here. The stock appears to be ranging, but remember our trigger: a breakout above resistance, in this case, above $0.565.
The major resistance comes in at $0.75. If Nabati can break and close above that zone, it would be quite the comeback and a new bullish outlook for the stock.