Ozempic, Wegovy, and other obesity (or weight-loss) drugs have seemed to upset the food and restaurant plays lately. Indeed, the obesity drug rise to popularity has sent many food plays in free-fall mode in what I’d like to refer to as the Ozempic onslaught.
As more people on Ozempic eat less, that could mean less spending at the local grocery store. But is that a death knell for the consumer-packaged goods or even the restaurant companies?
Not a chance. These obesity drugs are not for everyone. And just because such drugs prevent the munchies doesn’t mean we’ll suddenly lose the desire to have a chocolate bar or enjoy a delicious taco at midnight from Yum! Brands’ (NYSE: YUM) legendary Taco Bell chain.
All considered, Canadians should not hit the panic button over the potential for their favourite food stocks to be disrupted.
Yum! Brands
Yum! Brands is behind such chains as Taco Bell, Kentucky Fried Chicken (KFC), and Pizza Hut. The fast-food firm isn’t the healthiest in the world. And as more people take Ozempic and all the sort, the argument is that few of us will want to eat at the fattening fast-food joints.
Fried chicken, tacos, and pizza are cheap comfort foods that I think can still sell well, even as more people try those obesity drugs. How? Not everyone is going on Ozempic or has the desire to do so. Further, Yum! can expand internationally into markets where such chains would be welcome with open arms.
The stock trades at $116 and change, going for 23.6 times trailing price-to-earnings. The 2.07% yield is also rich, making Yum! stock a great contrarian buy, even for Canadian investors.
MTY Food Group
MTY Food Group (TSX: MTY) is the king of the food court. It’s behind many of the restaurants located at shopping malls, ready to feed hungry shoppers. Even for those on some sort of appetite-dampening drug, I find it hard to just pass by the food court after a long day of shopping. Remember, Ozempic doesn’t stop all food consumption!
MTY also has healthier options in the portfolio which, I believe, could continue to do well through a recession. The stock goes for 15.9 times trailing price-to-earnings, with a 1.92% dividend yield. Indeed, shares look way too undervalued to pass up after the recent spill.
Pepsi
Finally, we have Pepsi (NASDAQ: PEP) stock, which has a deep line-up of consumer packaged good food items that go beyond the flagship cola business. Indeed, PEP stock has been hurt badly as the Ozempic onslaught weighed in. Shares are off more than 18% from their highs.
Meanwhile, the dividend yields more than 3% at the time of writing. Indeed, the brands you’ll get from the name make it worth pursuing as a Canadian investor. The stock not only looks undervalued but is poised for a swift bounce once investors are ready to focus on the long-term opportunities at hand.
Foolish bottom line
Pepsi, MTY, and Yum! are tasty food stocks to buy as they plunge into their recent lows. Personally, Yum! stock is my favourite because the brands are bound to overcome these tough times.
