Pandemic Resistant Investments

Extraordinary challenges require extraordinary responses.

The pandemic-induced recession that has hamstrung or even eliminated entire industries forcing record numbers of workers on unemployment lines has forced many of these workers to reassess their financial situations.

Many want to avoid ever having to be in the position of wondering where their next check will come from.

After the last Financial Crisis, many investors pivoted away from Wall Street – left devastated by the mortgage-backed security debacle – towards alternative investments with a focus on recession-resistant industries. 

What many of these investors found was that certain food and drink market segments were thriving during the Great Recession even as the broader markets were suffering.

Some of the food and drink segments that thrived included:

  • Bread.
  • Sweet Spreads like PB&J.
  • Side Dishes like Mac n’ Cheese.
  • Frozen Meals.
  • Chocolate.
  • Coffee.
  • Alcohol.

The food and drink segments listed above fall within one of three categories that proved not only resilient during the last recession but also in the fact of the COVID-19 pandemic as well.

These categories are:

  • Necessity products (Bread).
  • Comfort foods (PB&J, Mac n’ Cheese, Coffee, Chocolate, Frozen Meals).
  • Luxury foods and beverages (Alcohol).

While Main Street investors have foolishly flocked to Wall Street and gold, savvy investors are avoiding these two pitfalls for good reason. 

The Dow is currently trading at a Price/Earnings ratio of 28.6 – nearly double the historic average of 15, which means there is a disconnect between the current state of the economy and the high price of stocks. They’re overvalued and bound to come crashing back to earth. ​​As for gold; the last time its price hit an all-time high after the Great Recession, it also hit its all-time low soon after.

Savvy investors are seeking recession-resistant alternative investments – particularly ones that cash flow. That’s why many are setting their sights on agriculture – particularly in the food and drink segments discussed above that thrive in downturns and are thriving now in this downturn.

One particular segment attracting attention and capital is the wine industry. 

​Of course, directly investing in a vineyard is unrealistic for 99.9% of investors who neither have the knowledge, time, expertise, or capital to start their brand of wines.

Fortunately, just like other cash flowing alternative assets like private lending, private equity and commercial real estate; agriculture also lends itself to convenient and accessible private investment opportunities operated by experts in the field.

When considering investing in the wine industry or any other agriculture-based industry, don’t think that investing in a vineyard operation is the best or only way to get involved.

Consider the many vertical facets of wine making and distribution that make up the wine industry including:

  • Growing.
  • Processing.
  • Bottling.
  • Retail.
  • Marketing.

In the early days of the iPhone, many investors discovered that investing directly in Apple wasn’t the only way to potentially profit from the smartphone boom. Investors flocked to ancillary businesses that supplied components to Apple to make the iPhone to profit from the boom without investing directly in Apple.

The same opportunities exist in the wine industry.

No need to invest in just a certain winemaking company. Consider all the ancillary businesses that supply these winemaking operations as well. There are more than one way to skin a cat in the wine industry or any other agricultural segment for that matter.

Extraordinary challenges require extraordinary responses. 

In this pandemic economy as with prior recessionary economies, fortune favors the bold. Investors like to stick with what’s comfortable. Witness the price of stocks and gold. But if history has taught us anything, stocks and gold are not reliable recession – or in this case pandemic – resistant investments.

If you’re looking for something familiar or comforting, why not look to the food and drink segments that have historically given people comfort through hard times and continue to do so today?

Private agricultural investments in the wine, cocoa, coffee industries, etc. with experienced, skilled and savvy operators is one way to profit from these thriving markets.

To survive this and future recessions, think outside the box by looking to agriculture and other like alternative investments.