Kraft Foods Group and H.J. Heinz agreed to pair up in a deal that will form a combined company with $28 billion in revenue. Here's how to trade it.
The deal, financed by Heinz owners Brazil's 3G Capital and Warren Buffett's Berkshire Hathaway, is the latest in a recent string of food-and-beverage mergers as the industry tries to reignite growth while Americans steer away from processed foods toward natural and organic items.
Read MoreBuffettbonanza? Heinz and Kraft to merge
While they have their challenges to raise growth, the deal will certainly increase the valuation of the sector as it highlights the value of legacy brands, cost-cutting opportunities and sales to the middle class in emerging markets. And of course investors will extrapolate that more M&A is ahead in the space.
The money play:
CNBC Pro, using quantitative tool Kensho, looked at the last 18 deals in the space, including five in the last two years, going all the way back to Philip Morris' purchase of Kraft in 1988. Here are the stocks that should benefit in the short term and long term from M&A activity in the industry, if history is any guide.
In the short term, watch Sysco, Conagra Foods and Coca-Cola Enterprises to get a quick pop as they have averaged the biggest one-day gains after a big food or beverage deal.
Longer term, Tyson Foods, Monster Beverage and J.M. Smucker stand out for their strong gains, on average, in the 30 days after M&A activity.
Wall Street is not a big fan of the industry because most of the stocks are trading near the consensus target price among analysts, according to FactSet. However, Kraft-Heinz will likely cause them to reassess their valuations and upgrades should follow.
Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.
