Following recent policy news, consider selling or avoiding PepsiCo (PEP), as multiple politicians have recently sold their shares, signaling potential headwinds. Similarly, corn processor Archer Daniels Midland (ADM) faces direct risk from a potential industry shift away from high-fructose corn syrup. Conversely, a key politician has been buying shares in food companies that may benefit from this change. These potential winners include Campbell's (CPB), Hershey (HSY), and Mondelez International (MDLZ). This "follow the money" strategy suggests a rotation out of HFCS-reliant companies and into those better positioned for a sugar-based snack market.

Coca-Cola (KO)

• The company announced on July 22nd that it will roll out a cane sugar version of its soda in the fall.
• This move is reportedly part of a "Make America Healthy Again" campaign, influenced by a push from former President Trump.
• The announcement coincided with its Q2 earnings report, which showed shares were up 32 cents since the previous year.
• A full switch from high-fructose corn syrup (HFCS) to cane sugar could increase the price of soft drinks by 10% to 15%.
• Despite the major announcement, trading of KO stock by members of Congress was described as "notably quiet."

Takeaways

• The shift to cane sugar presents a significant operational change for Coca-Cola. Investors should monitor how the company manages the higher ingredient costs.
• The potential for a 10-15% price increase on its products could impact consumer demand and sales volume. This is a key risk factor to watch in future earnings reports.
• The lack of significant trading by politicians could suggest uncertainty about the long-term financial impact of this change on the company.

Archer Daniels Midland (ADM)

• ADM is identified as a key player in corn syrup production.
• The company's stock was immediately impacted by the news of Coca-Cola's switch to cane sugar.
• ADM's stock dropped 6% in pre-market trading the morning after the announcement.

Takeaways

• The announcement represents a direct headwind for ADM and other companies involved in the corn processing industry.
• This event highlights the company's vulnerability to policy changes that reduce demand for high-fructose corn syrup. Investors should consider this a significant risk factor for the stock.

PepsiCo (PEP)

• Several members of Congress sold shares of PEP in the days surrounding the announcement about Coca-Cola's recipe change.
• Politicians who sold shares include:
  • Rob Resnahan
  • Scott Franklin
  • Jefferson Shreve
  • Bruce Westerman

Takeaways

• The selling activity by multiple politicians suggests a bearish sentiment on PepsiCo.
• The likely reason is that PEP, like Coca-Cola, uses high-fructose corn syrup and would be negatively affected by a broader industry or regulatory shift towards more expensive cane sugar.
• This "insider" selling could be interpreted as a signal that these politicians anticipate similar cost pressures and challenges for PepsiCo in the near future.

Other Food & Snack Companies

• Congressman Rob Resnahan, who sold shares of PepsiCo, also bought stock in several other food companies.
• These companies are described as those that "stand to benefit from a sugar-filled snack shift."
• The companies purchased were:
  • Campbell's (CPB)
  • Hershey (HSY)
  • Mondelez International (MDLZ)
  • General Mills (GIS)

Takeaways

• The buying activity from a member of Congress suggests a bullish view on these specific snack and food companies in light of the potential shift away from HFCS.
• Investors may want to research the ingredient lists of these companies. They may be positioned to benefit if they already use cane sugar or have product lines that are less dependent on HFCS, making them more resilient to this potential market change.
• This is an example of "following the money," where a politician's trades may signal which companies could be potential winners from a policy shift.