The great thing about the consumer goods sector is that it’s virtually recession proof. The same can be said of the alcohol industry as well, and these are the top picks to guard your portfolio against the global slowdown.
When the economy is booming, people splurge. They buy more comfort foods and alcoholic beverages. Heck, they even gravitate toward a premium brand or two as a little luxury reward.
In down markets, consumers become more frugal. Still, they hold on to some of the simple comforts that aren’t big-ticket items.
So, obviously, consumer goods sell more in expanding economies, but even when growth has stalled, consumer goods always have buyers.
Here we have seven solid food and drink stocks worth buying into now. They have sold off a bit from more optimistic earnings seasons, but they are set to surprise to the upside and will continue to grow because much of their revenue comes from North America. That means a strong dollar won’t hurt them as much as it would more international-leaning companies.
Consumer Goods to Buy Now: Constellation Brands, Inc. (STZ)
Constellation Brands (STZ) is the one spirits stock to make the list. It is actually the largest wine producer in the world, with more than 50 wine brands, including high-end Robert Mondavi and Simi and more price-focused brands like Rex-Goliath, Red Guitar and Toasted Head.
Its beer portfolio is also a powerful U.S. draw. It owns most of the top Mexican beers that will be occupying coolers and refrigerators this summer: Corona, Modelo, Pacifico and Victoria.
Its spirits line is limited, which is a good thing. Wine and beer are a growing market in the U.S. And people are becoming more selective when they buy spirits. They will pay up for nice bottle of wine or an imported beer rather than buy cheaper, more commercial products.
This fits Constellation’s business to a tee.
Consumer Goods to Buy Now: Clorox Co (CLX)
Clorox (CLX) likely doesn’t come right to mind when you’re thinking about food and beverage companies. It should.
This 103-year-old company built a successful business selling only bleach for its first fifty years. That’s very impressive — bleach isn’t a high-margin business, so to make that work took some good management.
Another compelling fact about CLX is that it’s raised its dividend for 40 consecutive years. See how many other companies you can find in the market that can say that.
There’s also the fact that 80% of CLX products are either No. 1 or No. 2 in their product categories. That tells me that Clorox is very strategic in adding brands to the franchise.
So, beyond cleaning products like Clorox, 409 and Tilex, what foods does it own?
It has pulled together a small collection of great niche brands: KC Masterpiece, Hidden Valley, Brita and Soy Vay.
That said, Clorox is a well-diversified winner.
Consumer Goods to Buy Now: WD-40 Company (WDFC)
WD-40 (WDFC) is the only company on the list that doesn’t have a food or drink subset.
But when you make the legendary WD-40, as well as an impressive line of commercial and household cleaning and maintenance products, it’s not really crucial. WDFC has stayed on the chemical side of products, with formulas that help you keep your equipment in great shape and keep a clean space.
The story goes, that the company founders were working on a water displacement lubricant and anti-corrosive for the aerospace industry. It took them 40 attempts before they nailed it. The WD stand for water displacement.
Its first contract was to protect the Atlas missile. Some of the people who applied it to the missiles liked the product so much they took it home. Now WD-40 is on every workbench and pegboard in America, right along with a roll of duct tape and some screwdrivers.
Warren Buffett would likely approve of this value stock.
Consumer Goods to Buy Now: Dr. Pepper Snapple Group Inc. (DPS)
Dr. Pepper Snapple (DPS) keeps it simple. It owns niche brands in the soft drink sector and knows better than to tangle with titans like The Coca-Cola Co (KO) and PepsiCo, Inc. (PEP).
DPS is an order of magnitude smaller than those two. And while it’s the oldest soft drink brand in the U.S., it’s found a way to make small beautiful.
Also, Dr. Pepper focuses solely on the North American market. That helps in tough global economic times like these because it means its revenues from abroad aren’t hurt by the currency exchange rate. (A strong dollar means revenue in other currencies, when converted to dollars, translates into less revenue.)
DPS is smart and diversified. Those are two key reasons this company has stayed out of the clutches of KO and PEP and built a strong portfolio of drinks on its own.
Its 2.4% dividend is also a nice kicker for a solid grower.
Consumer Goods to Buy Now: Campbell Soup Company (CPB)
Campbell’s Soup (CPB) certainly has a stable of brands underscoring its iconic image.
The latest trend in the packaged food sector is a growing demand for organic and healthy products. CPB has made that pivot flawlessly.
Just like big beer companies now find it much more efficient to snap up smaller breweries with promising niche markets rather than organically building new business from the ground up, CPB is moving into the new organics and healthy foods niche. It has acquired a handful of companies in recent quarters to bolster this end of the business, which now accounts for about 12% of the total.
This is one of the premier companies in this sector and is well placed for the current slow-growth market, both in the U.S. and internationally.
Consumer Goods to Buy Now: Sysco Corporation (SYY)
Sysco (SYY) is likely the most familiar company you have never heard of.
If you go out to eat, you likely have eaten a product that SYY has delivered. It is a North American distributor of food and food-related products to the food service industry, whether it’s a mom-and-pop diner, a Taco Bell, a hospital or a university dining hall.
SYY is a steady grower. Up 23% in the past 12 months, the stock also throws off a respectable (and solid) dividend of 2.7%. That’s not bad for a company that is essentially a grocery store on wheels.
What I mean to say is that this is a very low-margin business, so its ability to grow its business during periods of slow-growth is impressive. Sysco’s focus on the North American market also means that it will benefit quickly from any growth that happens domestically.
Consumer Goods to Buy Now: Hormel Food Corp (HRL)
Hormel (HRL), best known for Spam, is much more than ubiquitous canned hams, especially in recent years.
HRL also sports classic American brands like Dinty Moore, Skippy and Jennie-O, and is now building an impressive line of premium meats as well as a growing line of Latin products.
Now, HRL owns brands like natural meat-maker Applegate, protein drink-maker CytoSport and prepared foods-maker Wholly Guacamole.
On the Latin side, HRL owns the Chi-Chi’s, Dona Maria, El Torito and Embasa brands, to name just a handful.
Both of these sectors are showing strong growth, even in this slow-growth economy. That growth will only accelerate as the economy improves.
HRL stock is slightly off its 52-week highs, but that’s understandable given the fact that it’s up 36% in the past year, even after the consolidation. From here, there’s plenty of headroom left.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
