For the estimated 2.2 billion Christians throughout the world, the holiest of religious holidays is just around the corner. Easter brings both the devout and not-so-devout together to reconnect with family and faith. The geographic reach of Christianity also means that there are ample ways to profit from Easter — travel companies and hotels are among the obvious stocks to buy. But what better way to leverage Easter’s chocolaty goodness than with consumer goods?
No Easter celebration — whether involving giant furry animals or a Middle Eastern carpenter — is complete without some kind of confectionary arrangement. Food stocks — particularly consumer goods with recognized multinational brands — should find favor in the markets as families and church organizations ramp up their purchases ahead of the holiday.
And boy, are they ramping up! According to The Christian Science Monitor, more candy is consumed during the Easter season than in any other holiday except Halloween. However, the latest data indicates that Easter candy consumption trumps all. That alone should put consumer goods in the stocks to buy list, pronto!
Food stocks also have fundamental factors that have turned bullish in recent months. Primarily, lower gasoline prices aren’t just great for convenience stores; they increase discretionary spending across a broad range of small-scale items. With the average price of Easter treats ranging somewhere between $30 to $60, this perfectly aligns with the approximate savings accrued from cheaper gas. Going along with this argument is the nominally stronger U.S. labor market. No, wage growth isn’t quite up there yet, but we’re talking about buying food items, not Ferraris.
Out of the stocks to buy for this Easter holiday, few can leverage the season better than consumer goods. Their product offerings cut across religious lines, serving both the faithful and secular audiences alike. In addition, the low-cost of candy-related items means that they are within the financial reach of virtually everyone.
Here are three consumer goods to buy for your Easter basket!
Consumer Goods to Buy: Hershey Co (HSY)
According to social media aggregator Ranker, Reese’s Peanut Butter Eggs came in at number one as the most popular Easter candy. Reese’s, of course, is one of the more profitable — and tastiest — brands under HSY, so sales should do well this year, especially given the rise in consumer purchasing power.
This should be the case even though HSY is off to a choppy start in the markets. Year-to-date, Hershey shares are flat thanks to a recent series of selloffs. Wall Street is a little uncertain on HSY and consumer goods in general, as a rough 2015 skimmed a lot of momentum in the sector. Currency headwinds were a huge headache for HSY last year, resulting in an unexpected decline in revenue against 2014 sales.
But in the spirit of the season, we should also consider the bright side of things. Despite some miscues, HSY still has lofty profitability margins compared to other food stocks. Additionally, Hershey’s return-on-equity is one of the strongest in the industry. The balance sheet is a little more shady, with HSY carrying an uncomfortably high debt level relative to its cash account. On the other hand, free cash flow has been relatively stable over the past decade, and Hershey has been keeping a tight handle on capital expenditures.
Easter sales will be a welcome boost for HSY, which should help bring Hershey back on the right path.
Consumer Goods to Buy: Kraft Heinz Co (KHC)
When added with the amount of money Americans will spend on non-sweet food items, that figure jumps to more than $7 billion, putting consumer food stocks on high alert. Within that competitive group, the colossal titan Kraft Heinz Co (KHC) is certainly one of the go-to stocks to buy, if only because it’s so massive.
Formed as a merger between H.J. Heinz Co. and Kraft Foods Group in July of 2015, KHC is ranked as number three among American food and beverage companies, and number five internationally. Their wide range of snack items and popular drinks should serve them well this Easter, considering the growing diversity of products consumed during the holiday. And with 80% of Americans expected to celebrate Easter, it’s almost inconceivable that KHC wouldn’t receive a nice seasonality-related bump up.
So far in the markets, KHC is up 5% YTD. It’s definitely not the most sexiest of returns, but Kraft Heinz has earned its reputation as a stable stock to buy. KHC is in a secular business that isn’t subject to whimsical trading patterns. It also has very similar fundamentals to consumer goods competitor HSY; namely, better than average profit margins and consistently positive cash flow.
As Easter becomes a much more consumption driven holiday, look to profit from this trend with KHC.
Consumer Goods to Buy: Cal-Maine Foods Inc (CALM)
Roughly 80% of American parents plan to make an Easter basket for their children, with good portion of those baskets sure to include painted eggs. Some restaurants specifically increase egg purchases to meet seasonal demand. Finally, per capita egg consumption has been generally rising.
All these factors point not only to strong holiday sales, but also to consistent growth throughout the year — a bullish tailwind that has buoyed Cal-Maine Foods Inc (CALM) over the long-term. Among Easter-themed stocks to buy, CALM is simply the best of the best.
I would go so far as to argue that Cal-Maine should occupy a premium ranking of all stocks to buy lists ever compiled. Profit margins are through the roof, revenue and earnings growth are equally impressive, and there are significant strengths on the balance sheet.
Don’t be fooled by the implications behind the food stocks category. CALM stock beats several of its competitors with an 11% YTD performance. Not only that, CALM was one of the very few stocks that steadily gained traction in the markets in January, eventually closing the month up more than 7%. That gives me confidence that Cal-Maine can weather a lot of ugly storms and still be able to deliver the goods.
But don’t take my word for it — just look at the numbers behind CALM stock yourself!
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.