Fear and uncertainty driven by COVID-19 are taking a toll on the markets. But there are still some great stocks to buy in today’s enviornment. With Americans stockpiling ahead of possible quarantines, many consumer products and retail names present lucrative opportunities.
Why? Coast-to-coast, American households are flooding grocery stores and buying as many staples they can get their hands on. In an email to InvestorPlace, Marc Chopin, Ph.D., Dean of the College of Business and Economics professor of economics at the University of Idaho, outlined a few of the sectors that could be particular beneficiaries of the buying: “Some pharmaceutical companies, manufacturers of protective gear, dried and emergency food producers, manufacturers of antiseptics, sanitizers and similar products should all do well.”
This strong demand could translate into better-than-expected first quarter results for some.
These top “stockpile stocks to buy” are all strong defensive plays. With large economic moats and possible short-term demand boosts for their products/services, they could offer some relief to your portfolio.
Let’s dive in, and see why these are 3 stocks to buy as Americans stockpile.
Stocks to Buy as Americans Hoard: Kimberly-Clark (KMB)
I’m not sure why, of all things, toilet paper has become a hot commodity. But, with more Americans working from home and avoiding public places, acquiring a sizable supply of this non-perishable good may be a smart move.
As an investor, how can you profit from this short-term trend? By investing in Kimberly-Clark (NYSE:KMB) stock, of course! At least, according to CFRA’s Arun Sundaram. The analyst recently upgraded the stock rating, citing coronavirus-driven demand for toilet paper. This bodes well for the company, which manufactures the Cottonelle and Scott brands.
Even with this strong catalyst, Kimberly-Clark shares aren’t exactly pricey. The stock trades at a forward price-to-earnings ratio of 18.4. That’s below forward multiples for consumer products names Clorox (NYSE:CLX), Colgate-Palmolive (NYSE:CL), and Proctor & Gamble (NYSE:PG). All of these have forward P/Es above 20.
But that’s not all: Kimberly-Clark shares sport a 3.2% dividend yield. Add in the potential for increased earnings thanks to the mad dash for toilet paper, and this dividend is not only safe, but could increase over the next year.
In short, KMB stock could be the ultimate “stockpile” play. Recent developments may be a short-term trend. But this defensive stock could outperform, even as markets tumble lower.
Kroger (KR)
Many consumer products companies could benefit from panic buying. But don’t forget the retailers, and i’m not just talking “big box” stores like Costco (NASDAQ:COST) and Wal-Mart (NYSE:WMT). Grocery chains like Kroger (NYSE:KR) also stand to benefit from coronavirus-driven stockpiling.
As InvestorPlace’s Josh Enomoto discussed March 10, there are many reasons why Kroger could enjoy much-needed upside from the crisis. And not only because panic buying could improve sales this quarter. An economic downturn could mean more Americans shift spending from dining out to cooking at home. The current stockpiling phase is just icing on the cake for this recession-resistant play.
KR stock is also a great dividend play. Shares currently yield around 2.1%. But with a payout ratio of just 27.2%, the company could easily raise its dividend. With a 5-year dividend growth rate of 12%, this defensive stock may be a great long-term opportunity at today’s prices.
Don’t expect Kroger stock to skyrocket. It’s by no means a “hot stock.” Yet, this defensive name could hold stable, or return to prior-year highs ($35-$40 per share), even as markets head lower.
Mondelez (MDLZ)
American families may be making sure there’s enough rice, beans and veggies to make healthy meals during a shutdown. But, let’s be honest. In times like these, people are going to make sure they have enough treats on hand to weather the storm as well.
And that’s why Mondelez International (NASDAQ:MDLZ) is another opportunity to play the stockpiling trend. As the company behind the makers of Oreo cookies and Ritz crackers, the processed food giant could see serious upside from the crisis.
According to Wells Fargo’s John Baumgartner, decreased commodity prices could also benefit food manufacturing companies. The analyst included Mondelez on a list of food stocks to consider.
But there are some caveats. MDLZ stock trades at 19.1 times forward earnings. That’s far above peers like Kellogg (NYSE:K) and General Mills (NYSE:GIS), which trade for 16.8 and 15.9 times forward earnings, respectively.
Also, nearly two months ago, Mondelez announced coronavirus could have an impact on first quarter 2020 results. That’s because of a shutdown of some of its Chinese facilities (China represents around 4.5% of the company’s sales).
It remains to be seen whether coronavirus helps or hurts the packaged foods giant. Yet Mondelez’s status as a defensive stock, along with the stockpiling catalyst, makes it a compelling buy in today’s market.
Thomas Niel, contributor to InvestorPlace, has been writing single-stock analysis for web-based publications since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
