I am always on the hunt for “forever” stocks.
These are stocks that can weather the storm and grow even during the market’s darkest days. In fact, StreetAuthority co-founder Paul Tracy has built a very successful portfolio using this strategy.
It’s easy to find stocks that can capture the upside of a rising bull market, but what happens when we hit the next financial downturn? How do you find stocks that can not only weather the storm but also actually make you money while the economy falls apart?
For many investors, 2008 was a year that will not be forgotten. Between Oct. 9, 2007, and March 5, 2009, the Dow Jones industrial average lost more than half its value. Not only were the financial markets collapsing, but scandals were rampant, and consumer trust hit all-time lows. It truly was a time of panic.
Look how far the markets fell in 2008 and 2009:
Yet a well-known food company was up 42% between 2007 and 2010 while the stock market plummeted. With seven category-leading brands in the United States and eight in Canada, this “forever” stock clearly bucked the trend. How could one company experience such a good fate while others suffered?
It starts with its recession-proof product lineup, which consists of food staples such as coffee, peanut butter and jelly. It not only sells high-demand products, it owns the lion’s share of the market, with more than 30% market share for coffee and more than 40% market share for fruit spreads and peanut butter in the United States.
You know the brands: From Folgers and Dunkin’ Donuts coffee to Smucker’s fruit spreads, Jif peanut butter and Pillsbury cake mixes, this company has a substantial presence in grocery stores around the world.
The company I’m talking about is The J.M. Smucker Company (NYSE:SJM).
Here are a few more reasons I love this stock:
1. Strong market share: Smucker’s leading coffee brands give it the position to keep its products at the top of retailers’ lists and the negotiating power to keep healthy profit margins.
2. Improved outlook: As the employment rate drops and consumer confidence increases, this should lead to increased trading. Consumers should flock back to name brands, which will help Smucker’svolume, pricing and profits.
3. Strong growth: Smucker has transformed its business through acquisitions and will seek to continue to increase profitability while boosting its dividend.