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Consumer Stock Picks: 7 Must-Buys

Consumer stock are ideal investments during times of economic turmoil.

Stocks fell to new lows in September when the Federal Reserve raised interest rates by 75 basis points, falling below prior support levels. The Fed appears to be slamming the brakes on the already weakening economy until there is some sign of inflation easing. Overall, analysts anticipate a bad holiday season, and it appears that this difficult period will continue into 2023. Some investors are liquidating their holdings in favor of cash. Trying to time the market, on the other hand, has traditionally been a challenging task that might cause people to miss the huge recovery once the tide shifts. Rather, holding defensive equities to weather the market storm is a better approach. Few industries are more dependable than consumer staples. People will eat, drink, and purchase personal hygiene goods regardless of the state of the economy. Here are seven consumer staples stocks to consider right now.

McCormick & Company, Inc. (ticker: MKC)

McCormick is the world’s largest spice distributor. It also has a significant presence in sauces, seasonings, and tastes for food service companies. Because of the nature of the spices and seasonings sector, McCormick has a strong market position. Black pepper, oregano, and thyme are all difficult to compete with. Nobody is going to launch a new brand of oregano with unique characteristics. Furthermore, costs are low enough that people aren’t concerned about the cost of each specific spice they purchase. If customers prefer generic store spice brands, McCormick is a major manufacturer of those as well. And it’s not just spices; McCormick is a major supplier of sauces and tastes to chain restaurants. McCormick’s recent acquisitions of the French and Frank’s brands broadened the company’s presence in hot sauce and condiments. To summarize, consumers desire more tasty and fascinating cuisine, and McCormick delivers.

Hormel Foods Corporation (HRL)

Hormel is a packaged-foods firm established in Minnesota that largely focuses on proteins. The company is well-known for producing Spam canned meat. Because of this, investors may believe Hormel is outdated. However, Spam accounts for only a minor portion of Hormel’s total earnings. What distinguishes the brand is its vast variety of proteins that cater to different demographics. Many years ago, the corporation made a big move into turkey and is today the market leader in that health-conscious meat. Hormel sells the bulk of the nation’s pepperoni and is a key player in the bacon market. Hormel’s portfolio also includes plant-based meat substitutes. Furthermore, in recent years, Hormel has had strong positions in guacamole, peanut butter, nut butter, and Mexican salsas. Hormel stock is never particularly cheap – it currently trades at approximately 22 times forward earnings – but it has grown earnings and dividends at a 10% annualized pace over the long haul. In the food industry, that is a fantastic result.

The Hershey Company (HSY)

Hershey has shown to be an excellent defensive corporation in the face of the present inflationary surge. Chocolate is a fantastic product since it is cheap, consumers adore their preferred brands, and competition is restricted. Hershey and its main rival, Mars Inc., dominate approximately two-thirds of the American chocolate market, limiting pricing pressure. Store-brand sweets also have no traction, in contrast to most other food goods, where individuals will cut back during tough circumstances. Because of this advantageous position, Hershey has recently implemented significant price hikes without negatively impacting sales numbers. Hershey has also relocated much of its manufacturing to Mexico, which has helped to keep costs down. Add it all up, and Hershey’s earnings per share have more than doubled between 2017 and 2022. A conservative, recession-proof corporation with robust earnings growth is a winning combination for surviving present market conditions.

PLC Diageo (DEO)

Alcohol, like sweets, is a recession-proof sector. People drink to celebrate the good times as well as to commiserate during the bad. Diageo is well-known for its products such as Johnnie Walker, Tanqueray, Smirnoff, Don Julio, and Buchanan’s, as well as Guinness beer. Diageo had a solid 2020 and 2021, with the stock more than doubling from its epidemic lows. Guinness beer has outperformed most other beers, while the company’s extensive alcohol portfolio has stayed well despite some market difficulties. However, Diageo stock is currently in decline, owing in large part to the fact that the company is domiciled in the United Kingdom and its primary stock exchange is in London. The British pound has plummeted to multi-decade lows, displacing British assets such as Diageo. This has pushed Diageo to around 21 times the forecast earnings, which is a massive discount to Diageo’s regular trading range.

Brown-Forman Corporation (BF.A, BF.B)

Brown-Forman is another industry leader in the spirits sector. The corporation has owned the Jack Daniel’s whiskey brand for many years, transforming it from a small regional enterprise to a household name. Brown-Forman has had enormous success in recent years selling into expanding countries including Mexico and South America, which are quite welcoming to American whiskey. Furthermore, Brown-Forman wisely got on the tequila bandwagon in 2006, purchasing brands Herradura and El Jimador for $776 million. Tequila would go on to become extremely famous, making the company’s purchase an amazing home run. Since 2020, the company’s overall operating performance have been muted as the epidemic has closed down bars and European tariffs have hurt sales of American whiskey in Europe. However, results have turned the round in 2022, and shares may be poised to return to their recent highs.

Clorox Company (CLX)

Clorox has had one of the most unpredictable rides of any consumer staples firm. CLX stock was selling for around $160 per share prior to March 2020. Shares soared to $240 in the summer of 2020 as customers stocked up on cleaning supplies. Clorox shares, on the other hand, have plunged since then. They hit $120 at their lows and are still trading around $140 now, which is significantly lower than where Clorox was trading when the pandemic began. This is economics in action: Clorox experienced an initial sales boom but is now experiencing a lengthy downturn due to saturation in the cleaning products sector. Before 2020, Clorox was making more than $6 per share. Earnings are expected to be $4.07 per share this year, making the stock appear costly based on today’s results. However, as profits return to normal, Clorox’s valuation will fall dramatically. Meanwhile, shares offer a respectable 3.3% dividend yield.

Church & Dwight Company, Inc. (CHD)

Church & Dwight is a staples firm that has acquired a diverse range of consumer product brands. Condoms, kitty litter, deodorant, dental care products, and more items are now available at C&D. The problem with Church & Dwight is that its shares have typically been prohibitively pricey. People have paid a high price for the company’s outstanding growth record, which has been powered by an almost unending run of successful mergers and acquisitions. The turbulent 2022 market, on the other hand, is hitting the most highly valued equities, including Church & Dwight. Today, shares have fallen from a 52-week high of $105 to the $75 level. Even so, shares are still trading at 23 times forward earnings, which may not appear to be a steal. C&D, on the other hand, is a consistent growth machine in the usually staid consumer staples business, and as such, it may easily trade back above 30 times earnings once the present bear market subsides.

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