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Three Food Shares That Crushed the Market

food The Straits Times Index (SGX: ^STI) started 2013 strongly, posting nice gains all the way till May, before stock markets around the world roiled at US Federal Reserve Chairman Ben Bernanke’s comments about a possible slowdown in the Fed’s stimulus efforts.

Naturally, the STI wasn’t spared and it is down around 1.6% for the first six months of the year on last Friday’s (28 June 2013) close of 3,150. But, in investing, it’s always better to adopt a longer-term view and the STI’s performance over the past 12 months is decidedly better with an 8% return.

An 8% return from the STI since June 2012 is nice. But, the market-crushing returns from the following three companies (as seen from the chart below) are even better. And, they did so by being engaged in the relatively prosaic business of providing food.

Super Group’s (SGX: S10) mix of instant-beverages and beverage-ingredients has provided some refreshing liquid-nourishment for investors. Over the past 12 months, its shares have gained almost 80%, propped up by strong earnings growth. Super’s earnings for 2012 grew by 28% over 2011’s figure and recent first quarter results for the company saw 25% year-on-year growth in quarterly income.

The company’s Ingredient Sales division, where it sells products like spray-dried coffee, freeze-dried coffee and non-dairy creamer to other beverage manufacturers, has been a great contributor for the company’s growth in recent years. To beef up the division even further, Super’s adding a new product line – Botanical Herbal Extracts – that would create new business expansion opportunities.

Breadtalk (SGX: 5DA) first captured the public’s imagination back in 2000 when its first eponymous Breadtalk outlet opened at Bugis Junction, Singapore, and started hawking its unique bread creations. Since then, the company has expanded to 16 countries (including Singapore, China, Hong Kong and Indonesia) with more than 712 outlets.

Breadtalk’s moving into China very quickly – with the outlet count in China increasing by 27.7% to 331 in 2012 – as it sees the country as a great avenue for future growth with increasing affluence among citizens and a population of more than 1 billion.

Despite growing its top-line by 22% in 2012, Breadtalk’s bottom-line growth has been relatively lacklustre at 3.5%. The company’s first quarter results of 2013 saw better earnings growth as quarterly-earnings came in 15% higher year-on-year. In any case, the market’s giving the company plenty of respect so far as its shares have appreciated by 73% over the past 12 months.

Japanese ramen can make a great meal with delicious soup-bases and springy noodles and Japan Foods Holding (SGX: 5OI) would certainly know that. The company runs Japanese ramen outlets under different brands such as Ajisen Ramen, Menya Musashi and Aoba along with a host of other different Japanese-cuisine-related concepts.

With operations in Singapore, Malaysia, Indonesia and Vietnam, the company’s restaurants have attracted the taste buds of consumers in those countries, judging by its corporate performance since its IPO on Feb 2009 – Japan Foods’ earnings have increased by 136% from S$2.72m for the financial year ended March 2009 to S$6.41m for the financial year ended March 2013. Such strong earnings growth seldom goes unnoticed and the market has responded by bidding its shares up by 77% since June 2012.

 3 food shares that crushed the market chart

Source: Yahoo Finance

Foolish Bottom Line

It does not always take exciting hi-tech companies to deliver great long-term returns. Sometimes, companies involved with relatively hum-drum businesses (like the provision of food, for example) can also have stellar performances in the stock market.

At the end of the day, what’s more important is the company’s ability to improve its corporate performance all the time and deliver sales and earnings growth which would ultimately fuel long-term returns for shareholders.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing owns shares in Super Group and Japan Foods Holding.