Like a nagging itch on the crook of your back that prevents you from getting a restful night’s sleep, the novel coronavirus pandemic continues to remind us of how awful it is with every new mutation. Currently, the delta variant is at the top of the order, resulting in a massive resurgence of cases. Potentially, if the crisis worsens, investors may want to consider adding consumer goods stocks to their portfolio.
Of course, no one knows what will happen next. Certainly, there’s a case to be made that we’ve seen the worst of the delta variant. Former head of the Food and Drug Administration Dr. Scott Gottlieb is a proponent of this theory, recently going on CNBC to state that the delta-driven Covid-19 cases in the American South have peaked. If so, you might not want to load up excessively on consumer goods stocks.
Realize that with such an unpredictable backdrop, you don’t want to overtly commit your portfolio to any one category, whether that be growth plays or defensive ones like consumer goods. Nevertheless, it’s also helpful to realize that even medical and scientific experts don’t have a clear consensus on where the Covid-19 pandemic will take us. Thus, you should remain flexible with your investing approach.
For instance, Dr. Gottlieb has been one of the most optimistic experts regarding the trajectory of the delta variant. Others, including Ali Mokdad, PhD, chief strategy officer for population health at the University of Washington, stated that Covid-related deaths will peak by mid-September. Also, experts at the Covid-19 Scenario Modeling Hub stated that infections will expand into mid-October. Therefore, at least modest exposure to consumer goods stocks seems prudent.
And don’t think that every expert is so sure of where we’re headed. Amesh Adalja, MD, a senior scholar at the Johns Hopkins Center for Health Security, stated that it’s “unclear” when we will see a peak of delta-related infections. Thus, vigilance above all is the best approach. But if you’re feeling a little nervous, you might want to consider these consumer goods stocks.
- Clorox (NYSE:CLX)
- Archer Daniels Midland (NYSE:ADM)
- Church & Dwight (NYSE:CHD)
- Coca-Cola (NYSE:KO)
- Energizer (NYSE:ENR)
- Brown-Forman (NYSE:BF.B)
- Altria Group (NYSE:MO)
Finally, we should realize that the pandemic is a constantly shifting circumstance. With the lambda variant touching down in California, experts urge that people take basic precautions such as getting vaccinated. But keep this in mind as you’re pondering consumer goods: experts state that it’s a race against time to get people inoculated “before a more resistant mutation appears.”
Consumer Goods Stocks to Buy: Clorox (CLX)
One of the most uninspiring stocks that I can think of in any other circumstance, Clorox would bore even those who get up in the morning just to buy consumer goods investments. Don’t get me wrong, I’m not casting aspersions on the company or the sector. It’s just that when faced with competition from smart device companies to blockchain mining operators, CLX stock doesn’t exactly get the blood flowing.
Of course, that all changed when the pandemic first hit us. Suddenly, Clorox’s various disinfecting products — particularly its hand sanitizers — became golden commodities. I don’t want to stir up old crud but I’m sure many of you remember this story from the New York Times about a former military servicemember hoarding sanitizers and masks, gouging panicked customers in the process.
Not surprisingly, CLX stock turned in a robust double-digit performance last year. And shares momentarily spiked earlier in 2021 when we suffered a surge of new infections. But on a year-to-date basis, CLX has reversed course, shedding 17%.
I wouldn’t be a buyer now, but if Clorox shares manage to the $155 level or so, strong support exists in this range.
Archer Daniels Midland (ADM)
A food processing and commodities trading company, Archer Daniels Midland will always be a relevant investment thanks to the necessity of the underlying business. After all, no matter how bad a pandemic gets or how lackluster the economy becomes, everybody has to eat. Given that it’s one of the few sectors we really can’t live without, ADM is a no-brainer among consumer goods stocks.
Better yet, Archer Daniels Midland has rewarded shareholders for staying with the company. Over the trailing year, shares are up over 34%. And since the beginning of January, ADM has gained 19.5%. Much of that has to do with the company’s defensive profile, as well as its pertinence for future consumer trends. As an example, Archer provides plant protein nutrition solutions for its clients, feeding the meatless food craze.
Not surprisingly, the company is a dividend aristocrat, featuring 47 years of consecutive dividend increases. Its forward annualized yield is 2.5%, which may not be the greatest payout in the world. However, when you consider interest rates these days, ADM is rather appealing.
Consumer Goods Stocks to Buy: Church & Dwight (CHD)
Just to be clear, I’m personally hoping that the delta variant will be the last big surge in this pandemic. Frankly, I’m tired of the nonsense that we’ve had to deal with and the damage this has caused with personal relationships and community ties. But if delta continues to persist — or if lambda decides to go nuts — then Church & Dwight might be back on the buy list.
Obviously, the company is one of the giants in the consumer goods space. With a plethora of home care products, Church & Dwight’s pipeline could once again be cynically lucrative. But while the mainstream focus has been on cleaning products, Church & Dwight also specializes in other personal needs.
Condoms, for example. Back when the crisis first began, toilet paper wasn’t the only thing in demand as the manufacturing of “preventative measures” shut down. But earlier this year, CNN Business published a report stating that people were ready to start certain activities again.
Given that Church & Dwight sells the products that facilitate the safety of said certain activities, CHD stock is something to consider if “stuff” hits the fan again.
A usually dependable play when circumstances go awry, soft-drink giant Coca-Cola was not exempt when Covid-19 first infiltrated our borders. At one point, KO stock slipped below $40 during last year’s March doldrums. In hindsight, however, that was the perfect time to buy as shares quickly rebounded from the devastation.
Should the public health crisis worsen, Coca-Cola would be among the ideal places to park your money. Mainly, this is because brands that feature heavily in essential businesses like grocery stores basically enjoyed several months of free organic marketing. As such, it was an opportunity for the company to make the most of its packaging redesigns and other commercial endeavors.
What’s more, if we instead encounter an economic recession, Coca-Cola has already proven its viability and relevance before during the last major slowdown. In short, the company’s products provide a cheap thrill, something to break up the monotony of challenging times.
To be fair, the hit to restaurants and entertainment centers hurt Coca-Cola and consumer goods companies in the soft drink and junk food industry. Nevertheless, its grocery-related revenue channels should help mitigate downside if the delta variant gets out of hand.
Consumer Goods Stocks to Buy: Energizer (ENR)
Under the aphorism that when it rains, it pours, investors seeking cover with consumer goods stocks if the pandemic worsens should put Energizer on their radar. As the famous manufacturer of batteries and lighting and emergency preparedness products, Energizer could see a resurgence if Covid-19 outbreaks continue to stymie society.
First, the pandemic was an opportunity to realize that the world is a lot smaller than it was before globalization became the norm. Today, we can be impacted by incidents that originate on the other side of the planet. Beyond that, the pandemic coincided with natural and ecological disasters, some of which negatively affected the grid. Thus, it’s always a smart decision to prepare for disruptions.
Second, Americans have become much more self-aware of their vulnerability because of the pandemic. Of course, with fading infections came an apathy that drove down ENR stock since late April of this year. But a spike in cases could be the catalyst consumers need to realize that the lessons from the public health crisis should not be forgotten so quickly.
If you’re uncomfortable with cynical plays off the horrible impact of the pandemic, I can understand why you wouldn’t want to touch Brown-Forman. As one of the largest American-owned spirits and wine companies — and featuring the world-famous Jack Daniel brand — Brown-Forman has been a good friend to people during this crisis, but in some cases for dubious reasons.
According to a scientific research paper published on the National Institutes of Health’s website, “Emerging but limited evidence suggests that alcohol consumption has increased during the COVID-19 pandemic.” One of the key data points was that among respondents, “60% reported increased drinking but 13% reported decreased drinking, compared to pre-COVID-19.”
If indeed imbibing did go up during the lockdowns, it wouldn’t surprise me in the least. This has been a stressful time for everyone and many of us needed something to take the edge off. If the crisis worsens, you’d imagine that Brown-Forman’s business will perform well.
On the other end, should the crisis fade, BF.B could rise based on the return to normal activities — think sporting events and live entertainment. So this might be a solid opportunity no matter what happens next.
Consumer Goods Stocks to Buy: Altria Group (MO)
Rounding out the discussion on consumer goods stocks is yet another cynical play with tobacco firm Altria Group. For full disclosure, I own MO stock but aside from that bias, I genuinely believe that Altria could perform well should the pandemic continue to linger.
As I mentioned earlier, the Covid-19 crisis has been hard on every one of us. This is the first time in modern American history where a disaster isn’t localized to one particular part of the country. Instead, we’ve all sacrificed something to this crisis — rich or poor, young or old.
Moreover, the American Psychological Association stated in February of this year that “As the U.S. confronts a bitter election season, political unrest and violence, a shaky economy, and a soaring death toll due to COVID-19, 84% of U.S. adults say the country has serious societal issues that we need to address.”
Call me crazy but I don’t think we’re doing that hot of a job. Like it or not, many will turn to vices to again take the edge off. That being the case, MO may have a dubious path higher.
On the date of publication, Josh Enomoto held a LONG position in MO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.