In a new report, UBS analyst Steven Strycula discusses a shift in investment strategy in the U.S. food industry. According to Strycula, a dramatic change in the behavior of U.S. consumers now warrants an equally dramatic shift in the approach of investors.

“Consumers are shopping alt food channels, sampling smaller brands, seeking less processed foods and engaging different media,” he explained. The ultimate impact of this behavior is a 1-2 percent drag on industry sales per year.

Strycula believes that many top food stocks have become overvalued given decelerating margins and EPS growth and category fragmentation.

Despite the bad environment, Strycula sees opportunity in stocks exposed to health and wellness (such as WhiteWave Foods Co WWAV 0.91%) and stocks exposed to developing countries (such as Mondelez International Inc MDLZ 0.27%).

On the other hand, UBS urges…

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