In this article, we will take a look at the 10 best consumer staples stocks to buy now. You can skip our comprehensive analysis of the consumer staples industry and go directly to the
5. The Procter & Gamble Company (NYSE: PG)
Number of Hedge Fund Holders: 83
The Procter & Gamble Company (NYSE: PG) is a Cincinnati-based company that makes and sells consumer goods such as beauty and healthcare products. These include shampoos, deodorants, and skincare products. The firm was founded in 1837 and ranks fifth on our list of 10 best consumer staples stocks to buy now. Some of the brands it owns include the Head & Shoulders, Safeguard, Gillette, Oral-B, Ariel, Pampers, and others. The firm has a market cap of more than $333 billion and posted more than $70 billion in annual revenue in June 2020.
On April 20, The Procter & Gamble Company outlined a plan to increase prices of products as production costs increased. Investment bank Wells Fargo noted the gain in share price of the firm after the announcement of the hike but said it remained to be seen just how much of a catalyst the hike would provide when compared to rising production costs.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Cedar Rock Capital is a leading shareholder in the firm with 9.8 million shares worth more than $1.3 billion.
4. Tyson Foods, Inc. (NYSE: TSN)
Number of Hedge Fund Holders: 38
Tyson Foods, Inc. (NYSE: TSN) is an Arkansas-based multinational food company. It was founded in 1935 and is placed fourth on our list of 10 best consumer staples stocks to buy now. Tyson is the second largest producer of beef meat, chicken meat, and pork meat in the world. Some of the famous brands it owns include Jimmy Dean, Hillshire Farm, Ball Park, Wright, State Fair, Aidells, and Gallo Salame. Some products of the firm are also sold under the Tyson brand name.
Tyson Foods, Inc. has been investing in poultry as demand grows around the world. On April 22, the firm announced that it would be investing close to $48 million in an Arkansas poultry operation. The announcement followed the opening of a new Tyson poultry plant in Tennessee earlier that month.
At the end of the fourth quarter of 2020, 38 hedge funds in the database of Insider Monkey held stakes worth $867 million in the firm, up from 36 in the preceding quarter worth $618 million.
3. McCormick & Company, Incorporated (NYSE: MKC)
Number of Hedge Fund Holders: 36
McCormick & Company, Incorporated (NYSE: MKC) is a Maryland-based food company that makes and sells spices, seasoning mixes, condiments, and other flavoring products. It was founded in 1889 and is placed third on our list of 10 best consumer staples stocks to buy now. Some of the brands it owns include McCormick, French, Frank’s RedHot, Lawry’s, Gourmet Garden, Club House, and others. The company has a partnership with technology firm IBM to use artificial intelligence in order to develop better food flavorings.
McCormick & Company, Incorporated stock went up more than 5% on March 30 after the company announced quarterly results, reporting a revenue of more than $1.4 billion, up more than 225 compared to the same period last year and beating market estimates by a healthy $110 million.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in the firm with 16.1 million shares worth more than $1.5 billion.
In the said letter, Amana Mutual Fund highlighted a few stocks and McCormick & Co Inc (NYSE:MKC) is one of them. Here is what Amana Mutual Fund said:
“Spice merchant McCormick has held up reasonably well, but we thought it might do better given the surge in home cooking. Of course, the restaurant and institutional business has fallen off.”
2. Costco Wholesale Corporation (NASDAQ: COST)
Number of Hedge Fund Holders: 61
Costco Wholesale Corporation (NASDAQ: COST) is a Seattle-based retail seller. It was founded in 1983 and is placed second on our list of 10 best consumer staples stocks to buy now. The company is one of the largest retail brands in the world with operations in tens of different countries. The firm aims to open warehouses in New Zealand and Sweden next year. Costco sells packaged foods, groceries, beverages, cleaning supplies, electronics, and other items. It has a market cap of more than $160 billion.
Costco Wholesale Corporation reported strong sales growth in April, posting more than $18 billion in sales for a five week period beginning in March, an increase of more than 17% compared to the same period last year. Investment advisory UBS gave Costco an Outperform rating the same month.
At the end of the fourth quarter of 2020, 61 hedge funds in the database of Insider Monkey held stakes worth $3.6 billion in the firm, down from 73 in the preceding quarter worth $3.8 billion.
1. Brown-Forman Corporation (NYSE: BF-B)
Number of Hedge Fund Holders: 29
Brown-Forman Corporation (NYSE: BF-B) is a Kentucky based maker of wines. It was founded in 1870 and is ranked first on our list of 10 best consumer staples stocks to buy now. Some of the products it markets include spirits, wines, cocktails, vodkas, tequilas, champagnes, brandy, bourbons, and liqueurs. It offers them under various brands, including Jack Daniel’s, Woodford Reserve, Canadian Mist, GlenDronach, BenRiach, and others. Brown-Forman primarily operates in North America, Central America, and Europe.
Brown-Forman Corporation (NYSE: BF-B) was given an Outperform rating by investment advisory Cowen on March 16 on the back of a record cash balance. There were also reports that the firm was readying a special dividend offering for shareholders.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in the firm with 10.2 million shares worth more than $814 million.
You can also take a peek at 10 Best Travel Stocks to Buy Right Now, and 10 Best Automotive Stocks to Invest in Now.
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The toilet paper shortages at the beginning of the COVID-19 pandemic drove a massive fear-induced shopping spree for consumer staples in early 2020. This drove the shares of consumer staples stocks to new but short-lived highs as a detailed look at consumer spending habits indicated that while some staples continued to sell like hot cakes, there were some others that decreased in demand. For example, financial research firm Fidelity has found that the sales of packaged food items increased in lockdown but skincare products experienced declines.
The highly consolidated nature of the consumer staples like beverages and household items is expected to drive the rise in demand for these commodities even as the coronavirus lockdowns become a distant memory. For example, The Procter & Gamble Company (NYSE: PG) has signaled that it is increasing the pricing on items it manufactures as supply chain issues because of the pandemic result in decreased production amid high demand. The Procter & Gamble Company last raised prices significantly more than a decade ago.
Even retailers have not been spared from the impact of the post pandemic economy. Costco Wholesale Corporation (NASDAQ: COST), one of the largest retailers in the world that operates on a membership basis, saw share prices fall as much as 17% earlier this year as investors expressed concern about the firm matching high sales numbers from 2020. However, in answer to these worries, Costco Wholesale Corporation has reported a 7% increase in membership numbers in the past twelve months, with renewal rates hovering at around 90%.
For others in the consumer staples industry, innovation has been the answer to the uncertainties surrounding the market. Tyson Foods, Inc. (NYSE: TSN), one of the biggest manufacturers of processed meat, has said it plans to launch plant-based meat products like hamburgers and sausages as the coronavirus vaccinations allow for a return to normal and result in an increase in the number of people dining out at restaurants or gathering together for parties. Tyson Foods, Inc. aims to compete on pricing with established alternative meat companies.
Growth Catalysts for Consumer Staples Stocks
There are several studies that contend that the spending habits developed by consumers in lockdown are likely to continue because of several reasons. One of these is the increase in work-from-home jobs. A study by the Stanford Institute for Economic Policy Research claims that almost 42% of workers who were employed in early March transitioned to fully working from home by the end of 2020. Even as they return to work this year, the time they spend at home is still expected to rise – 300% according to a survey by the Federal Reserve Bank of Atlanta.
The divide between different consumer staples drawn as a result of the pandemic might increase further this fiscal year and it is very important for investors to observe these trends carefully to bet on companies that stand to gain from this imbalance. The potential downside to ignoring the changing market dynamics can very well be observed by looking at the performance of hedge funds that stubbornly refused to adapt to the new financial world steadily developed by technological disruption over the past few years.
In fact, the entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of 10 best consumer staples stocks to buy now.
Best Consumer Staples Stocks to Buy
10. Altria Group, Inc. (NYSE: MO)
Number of Hedge Fund Holders: 37
Altria Group, Inc. (NYSE: MO) is a Virginia-based firm that deals in tobacco, cigarettes and related products. It is placed tenth on our list of 10 best consumer staples stocks to buy now. The firm is most famous for being the owner of the Marlboro brand of cigarettes, as well as the Black & Mild cigar brand. Altria has stakes in the wine business too, and owns more than 14 wine brands. It has diversified business to include services in finance, transportation, real estate, and manufacturing industries over the years.
Altria Group, Inc. was given a Buy rating by Bank of America on April 20 despite reports that the US government was planning to further reduce nicotine levels in cigarettes. The bank said the company had a history of navigating regulatory concerns and the exposure Altria had with non-nicotine products would serve it in good stead moving ahead.
At the end of the fourth quarter of 2020, 37 hedge funds in the database of Insider Monkey held stakes worth $1.08 billion in the firm, down from 47 the preceding quarter worth $1.25 billion.
Oakmark Funds, in their Q1 2021 investor letter, mentioned Altria Group, Inc. (NYSE: MO). Here is what Oakmark Funds has to say about Altria Group, Inc. in their letter:
“We initiated a new position in Altria, which commands roughly 50% of the cigarette and smokeless tobacco market in the U.S. Both of these markets are duopolies that we believe have exhibited strong pricing power over time. While the shares trade at a low multiple of reported earnings, Altria also owns valuable stakes in other non-core businesses, including ~10% of AB InBev, 35% of Juul and 45% of Cronos. Excluding the values of these stakes and their respective earnings contribution, we were able to purchase shares of Altria for less than seven times our estimate of next year’s earnings. This compares to other consumer brands with less favorable earnings growth profiles that trade for three times Altria’s multiple. The company also has several promising reduced-risk products that may appeal to tobacco users, including On! and iQOS. We believe these products position the company well to help consumers slowly transition to a tobacco-free future. We expect management to return the vast majority of future earnings to shareholders given the company’s strong balance sheet, high free cash flow conversion and limited capital requirements.”
9. Mondelez International, Inc. (NASDAQ: MDLZ)
Number of Hedge Fund Holders: 50
Mondelez International, Inc. (NASDAQ: MDLZ) is a Illinois-based multinational firm that makes and sells packaged food products. The firm comes in at ninth place on our list of 10 best consumer staples stocks to buy now. Mondelez sells several snack food items and owns the Oreo, Tang, and Cadbury brands, among others. The company is aggressively expanding stakes in the packaged food sector with big acquisitions of Give & Go and Hu Master Holdings in the past two years.
Mondelez International, Inc. sells products in more than 160 countries. In late April, the company posted quarterly results, reporting a revenue of more than $7.4 billion, a close to 8% increase compared to the same period last year, beating market estimates by around $230 million.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Trian Partners is a leading shareholder in the firm with 12.2 million shares worth more than $715 million.
8. PepsiCo, Inc. (NASDAQ: PEP)
Number of Hedge Fund Holders: 56
PepsiCo, Inc. (NASDAQ: PEP) is a New York-based multinational food, snacks and beverage company. It was founded in 1898 and is placed eighth on our list of 10 best consumer staples stocks to buy now. Some of the products that the firm offers include dips, cheese-flavored snacks, corn, potato, and tortilla chips; cereals, rice, coffee, and juices among others. The famous brands it owns include Cheetos, Doritos, Pasta Roni, Aquafina, Mountain Dew, Pepsi, 7UP, and others.
PepsiCo, Inc. stock registered gains on April 21 after investment advisory UBS upgraded it to a Buy from Neutral after the New York firm posted strong quarterly earnings. UBS revised the price target on Pepsi to $165 from $145.
At the end of the fourth quarter of 2020, 56 hedge funds in the database of Insider Monkey held stakes in the company worth $4.2 billion, up from 52 in the preceding quarter worth $2.9 billion.
7. Energizer Holdings, Inc. (NYSE: ENR-PA)
Number of Hedge Fund Holders: 26
Energizer Holdings, Inc. (NYSE: ENR-PA) is a Missouri-based company that markets batteries and lighting products. It was founded in 1896 and is placed seventh on our list of 10 best consumer staples stocks to buy now. The firm owns the Energizer and Eveready brands which offer lithium, alkaline, carbon zinc, nickel metal hydride, zinc air, and silver oxide batteries. The lighting products it makes include headlights, lanterns, and other kinds of lights. It also sells automobile care products like fragrances and interior cleaners.
Energizer Holdings, Inc. shares jumped more than 5% in February this year after the firm posted strong quarterly results beating market estimates on net sales by almost 4%. The firm said at the time that it was raising the adjusted earnings per share outlook for the rest of the fiscal year on the back of the solid results.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm GAMCO Investors is a leading shareholder in the firm with 1.7 million shares worth more than $74 million.
6. Pilgrim’s Pride Corporation (NASDAQ: PPC)
Number of Hedge Fund Holders: 17
Pilgrim’s Pride Corporation (NASDAQ: PPC) is a Colorado-based food company that is one of the largest chicken meat producers in the United States. It was founded in 1946 and is ranked sixth on our list of 10 best consumer staples stocks to buy now. The firm has operations in the US, the United Kingdom, Mexico, Puerto Rico, Europe, and Asia. The firm sells meat-related products under brands such as the Pilgrim’s, Just BARE, Gold’n Pump, Gold Kist, County Pride Chicken, Pierce Chicken, Pilgrim’s Mexico, and others.
Pilgrim’s Pride Corporation was listed as one of the stocks to watch out for by Bank of America in February after popular fast food chain McDonald’s announced it would start offering new chicken sandwiches, leading to an increase in demand for chicken meat from the Colorado firm.
At the end of the fourth quarter of 2020, 17 hedge funds in the database of Insider Monkey held stakes worth $804 million in the firm, down from 18 in the previous quarter worth $501 million.
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Disclosure: None. 10 Best Consumer Staples Stocks to Buy Now is originally published on Insider Monkey.
