It remains to be seen whether stocks will start to make a big comeback over the next twelve months after a rough 2022. However, while the near-term forecast remains murky consumer stocks to buy and hold can help stabilize your portfolio.
The key factors behind 2022’s stock market declines, such as high inflation, rising interest rates, and slowing economic growth, remain on the table. This continued uncertainty, though, works in your favor.
Scores of high-quality stocks continue to trade at more-than-favorable prices. In the meantime, such plays could remain “safe harbors,” less volatile than stocks more greatly affected by the aforementioned macro factors. Many of these stocks also provide steady returns via dividends.
On a longer timeframe, as economic and stock market conditions improve, top-rated stocks could deliver outsized returns in a broad market recovery.
Put simply, it’s time to seize the opportunity, and consider entering positions in these seven consumer stocks to buy and hold. Each one earns either an A or B rating in Portfolio Grader.
|CAAS||China Automotive Systems||$5.86|
|PM||Philip Morris International||$101.59|
Agribusiness giant Archer-Daniels-Midland (NYSE:ADM) has many qualities that make it a great stock to buy and hold in all markets.
For one, ADM is a bona fide “dividend aristocrat,” with 29 consecutive years of dividend growth.
At today’s prices, ADM stock sports a forward yield of 1.78%. Along with yield, Archer-Daniels-Midland offers good value. Shares today trade for only 12.4 times earnings. Yes, there is a reason for this consumer stock’s low valuation. Earnings have skyrocketed in the past year, thanks to the big run up in grain and oilseed prices.
But with the big jump in recession worries, shares have pulled back. However, as supplies remain tight, grain and oilseed prices are likely to remain elevated this year. Add in a potential boost in demand, from China’s post-pandemic reopening, and earnings this year could exceed expectations. In turn, pushing A-rated ADM stock back to higher prices.
Arhaus (NASDAQ:ARHS) shares have more than doubled from their 52-week low set last summer.
In hindsight, the market likely overreacted when worries of a recession and housing bust began to spike in mid-2022. This omnichannel retailer of premium home furnishings has continued to deliver strong results thus far.
Last quarter, revenue grew 57.4%, and earnings per share jumped by more than five-fold. Yet while investors are now aware that this company’s prospects during the current economic downturn may be stronger than initially anticipated, that doesn’t mean ARHS stock is running out of steam.
Growth may slow down temporarily, but when economic conditions normalize, Arhaus will return to high-growth mode. When this happens, you can expect this B-rated stock, trading for just 13.4 times earnings today, to soar towards a considerably higher valuation. This makes ARHS one of the best consumer stocks to buy and hold.
China Automotive Systems (CAAS)
Yet while CAAS stock has pulled back since then, don’t assume the ship has sailed with this auto parts stock. Although it may take some time for the “China reopening” to play out, it’s likely to have a positive impact on this company’s bottom line.
More importantly, CAAS’s valuation doesn’t fully price-in this tailwind. Shares trade for only 8.3 times earnings.
Other growth catalysts, such as an expanded partnership with Chinese electric vehicle (or EV) maker BYD Company Limited (OTCMKTS:BYDDF) aren’t really priced into CAAS stock, either.
With all this in mind, it makes sense why this stock earns an A in Portfolio Grader, and why it’s one of the best opportunities out there among consumer stocks.
Manchester United (MANU)
Admittedly, take a look at a stock chart, and it may seem as if Manchester United (NYSE:MANU) is a stock that’s already spoken for. That is, shares in the company, which owns one of the world’s most valuable sports franchises, have spiked on takeover rumors.
Up more than 75% since mid-November, many investors may believe that the offer price from a potential bidder is already baked into the current price of MANU stock. Sure, you may want to ease into this stock, given the possible volatility if a deal fails to materialize in the near term. However, there’s no reason to pass up completely on “Man U.”
Much like with NFL football teams stateside, English Premier League soccer teams have continued to steadily rise in value, due to their scarcity, and the prestige that comes from owning one. Assuming this trend continues, keep this B-rated stock on your consumer stocks watchlist.
Altria Group (MO)
You may question why I consider tobacco company Altria Group (NYSE:MO) one of the top consumer stocks to buy and hold. This is mostly due to some of the challenges Altria, the parent company of Philip Morris USA, recently experienced.
For instance, the company’s ill-fated investment in vaping company Juul Labs. This has made investors skeptical about Altria’s ability to adapt to the shift from cigarettes to smoke-free tobacco and nicotine products. Also, back in November, analysts at UBS downgraded MO stock, citing concerns that smokers are downtrading to lower-priced brands.
So, what makes B-rated MO still a buy? All of this pessimism is fully factored into its valuation, and then some. This venerable consumer stock is a steal at 9.5 times forward earnings, and shares have a forward dividend yield of 8.26%. Furthermore, a big move into the smoke-free market isn’t off the table.
Philip Morris International (PM)
Altria owns the rights to the Marlboro cigarette brand in the United States, but Philip Morris International (NYSE:PM) is the “Marlboro Man” for the rest of the world. However, that’s not the reason why PM, spun off from MO in 2008, is popular among tobacco stock investors.
Instead, it’s this company’s move into higher growth areas of this industry that have made PM stock appealing. Between the strong growth of its IQOS heated tobacco product, and the recent acquisition of smokeless tobacco and nicotine products maker Swedish Match (OTCMKTS:SWMAY), PM is better-positioned to thrive in a “post-smoking” world.
Of course, PM’s valuation takes these stronger growth prospects into account. The stock trades for 17.8 times forward earnings. PM also has a lower dividend yield (5.01%) than MO. However, if growth rather than value is more your investing style, buy this B-rated consumer stock.
Resilient during 2022, Walmart (NYSE:WMT) is likely to remain so in 2023. At least, that’s the view of Credit Suisse’s Karen Short. Last month, Short named WMT a top pick among consumer stocks, and not only due to the big box retailer’s qualities as a defensive play.
Alongside this factor, the sell-side analyst argued that Walmart has been successfully playing offense, gaining market share, and making a further move into the digital realm. I more-or-less agree with this assessment. Thriving despite issues such as inflation and the economic slowdown, this retail powerhouse is poised to continue delivering steady earnings growth, in line with expectations.
In turn, this points to solid and steady appreciation ahead for B-rated WMT stock. Add in WMT’s 1.56% dividend, which has increased 49 years in a row, and it’s clear why this is still one of the best consumer stocks to buy and hold.
On the date of publication, Louis Navellier has a position in ADM.
On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article held MO.