Monday, April 15, 2024

"Large Fund Bets Big on Groceries in the Face of Persistent Inflation"

Food inflation, as reported in the CPI and the FAO's Food Price Index, is subdued but based on what we're seeing in the major grain futures, is ticking up. As northern hemisphere farmers get into their fields and start burning diesel and gasoline the 10 - 20% jump in crude prices starts to feed in. Then in the fall the stuff has to be transported and next thing you know we're looking at 4 - 5% headline CPI inflation.

From Barron's, April 14:

Alaska Permanent, the largest U.S. state wealth fund, tripled its investments in Walmart and Kroger.

One of the first sovereign-wealth funds, and the largest at the state level in the U.S., just made a big bet on groceries as inflation continues to pressure American consumers.

Alaska Permanent Fund tripled its investments in shares of Walmart and Kroger —the respective No. 1 and No. 2 players in terms of their share of the U.S. grocery market—in the first quarter. The fund also bought more Ford Motor stock, and slashed a stake in Pfizer in the quarter.

It disclosed the stock trades, among others, in a form it filed with the Securities and Exchange Commission. Alaska Permanent didn’t offer a comment for this story. Created in 1980, it manages about $78 billion in assets, with about $27 billion of that in stocks.

The fund bought 22,400 more Walmart shares in the first quarter to lift its investment to 31,500 shares. Walmart stock soared 15% in the first quarter, compared with a 10% rise in the S&P 500 index. So far in the fourth quarter, shares are flat while the index is down 3%.

Strong earnings and news that Walmart was buying the smart-TV maker Vizio lifted the retailer’s shares to a record intraday high of $61.66 in March. Although Walmart sells many things other than just food, its grocery sales in 2023 were more than twice Kroger’s.

Kroger is trying to bulk up by buying Albertsons , a rival grocer, but the Federal Trade Commission has sued to block the deal. Kroger says the FTC’s decision makes it more likely that America’s consumers will face higher food prices and that there will be fewer grocery stores. Albertsons has said the combined company would be a stronger competitor against the grocery operations of Walmart, , and Costco Wholesale....