In this article, we will take a look at the 7 best mid-cap consumer defensive Stocks that currently offer attractive upside potential for investors.
On March 5, Franklin Templeton published its outlook on consumer defensive stocks, and the case they’re making for the sector is hard to ignore right now. After years of underperformance, consumer defensive stocks are starting to look genuinely attractive again. Valuations relative to the broader market are near their lowest point in a decade, dividends are healthy at 2.7%, well ahead of the broader market, and there are early signs of an earnings recovery taking shape across the sector.
The rotation story is playing a role, too. As investors grow more cautious about stretched tech valuations and the broader disruption AI could bring, money is quietly moving toward more defensive corners of the market. Consumer defensives fit that bill well, demand for everyday staples is steady, cash flows are reliable, and the sector sits largely outside AI’s path of disruption.
That said, Franklin Templeton is clear that this isn’t a buy-everything moment. Many companies in the sector are still midway through restructuring programs, and earnings recovery will take time to fully play out. Being selective here is key.
So which consumer defensive stocks are worth watching right now? Here’s a look at our 7 best mid-cap consumer defensive stocks.
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Our Methodology
To identify relevant stocks for this article, we screened U.S.-listed consumer defensive companies with market capitalizations between $2 billion and $10 billion. Also, we shortlisted only stocks with at least 20% upside potential according to consensus as of the March 23 closing. Finally, we selected 7 stocks with the highest upside and ranked them in ascending order.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
7. BBB Foods Inc. (NYSE:TBBB)
BBB Foods Inc. (NYSE:TBBB) is one of the 7 best mid-cap consumer defensive stocks to buy.
As of the March 23 closing, consensus sentiment for BBB Foods Inc. (NYSE:TBBB) remained moderately bullish. The stock received coverage from 6 analysts, 4 of whom assigned Buy ratings and 2 of whom gave Hold ratings. With no Sell rating, it has a projected median 1-year price target of $41.20, implying upside of almost 23%.
On March 13, Alejandro Fuchs from Itau BBA upgraded BBB Foods Inc. (NYSE:TBBB) from a Market Perform rating to Outperform. The analyst estimated a target price of $42, which yields more than 25% potential upside at the prevailing level. Fuchs referred to the stock’s 20% dip that creates an attractive entry point for investors, and also attributed his rating upgrade to the stock’s current valuation.
Back on February 20, UBS reaffirmed its Neutral rating for BBB Foods Inc. (NYSE:TBBB). In the process, the firm increased its target price for the stock from $31 to $43. The upward revision results in an adjusted upside potential of more than 28%.
BBB Foods Inc. (NYSE:TBBB) operates grocery stores in Mexico, targeting low- to middle-income consumers through a chain of retail outlets. It provides both food and non-food products, covering both branded and private-label categories. These include electronic items, clothing products, and household goods.
6. Smithfield Foods Inc. (NASDAQ:SFD)
Smithfield Foods Inc. (NASDAQ:SFD) is one of the 7 best mid-cap consumer defensive stocks to buy.
On March 9, Smithfield Foods Inc. (NASDAQ:SFD) shared that the company is expected to complete its $450 million acquisition of Nathan’s Famous Inc. (NASDAQ:NATH) during the first half of the year. Smithfield has full brand ownership and strategic control over Nathan’s long-standing licensing relationship because of the agreement.
The company claims that the transaction is a logical fit that unites another leading brand into its portfolio of packaged meats, boosts the presence of beef while using scale in manufacturing, marketing, retail, and foodservice distribution, and encourages long-term sales and cash flow visibility. The company targets approximately $9 million in annual cost synergies by the second anniversary of closing and expects the deal to be immediately accretive to adjusted earnings per share.
On February 17, Smithfield Foods Inc. (NASDAQ:SFD) announced its plan to build a new processing facility in Sioux Falls, South Dakota. The company said the project, which is subject to regulatory approvals, will replace its existing plant and be located in Foundation Park.
Smithfield currently employs around 3,200 people in the area and contributes about $200 million in annual wages, while also supporting thousands of indirect jobs across agriculture and related sectors.
Smithfield Foods Inc. (NASDAQ:SFD) offers packaged and fresh food across the United States and international markets. The company sells packaged meat products such as sausage, deli, bacon, and hot dogs under several brands. These include Farmer John, Carando, Kretschmar, Armour, John Morrell, and more.
While we acknowledge the potential of SFD to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than SFD and that has 100x upside potential, check out our report about the cheapest AI stock.
Click to continue reading and see the 5 Best Mid-Cap Consumer Defensive Stocks to Buy.
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