We recently published a list of the 12 Best Household Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where The Procter & Gamble Company (NYSE:PG) stands against the other best household stocks to buy according to hedge funds.
Is There a Softening in the Consumer Staple Sector?
On March 21, Bryan Spillane, Bank of America Securities’ senior food and beverage analyst, appeared on CNBC’s ‘The Exchange’ to discuss things across his space and the trends surrounding consumer staples. He said that going through the first quarter of the year and having check-ins with companies has led him to conclude that the conditions in the sector have been soft, which is true across his entire coverage universe. Consumers are pulling back a bit, and there’s uncertainty surrounding the conditions in the sector. What’s surprising is that these trends started in January and extended through the first quarter.
The sector, however, is showing a dichotomy. Spillane believed this is a market for consumer staples, as we are looking for defensiveness and certainty. But at the same time, we are doing that at a time when the fundamentals appear to be decelerating. This creates a dynamic for investors to really understand the market and where it would be best to put their money in, as not all seem as safe as they would typically be.
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The Biggest Challenge in Consumer Staples
According to Spillane, the biggest challenges right now are in the beverage alcohol sector specifically, which dropped off unexpectedly in the first quarter of this year after a weak fourth quarter last year. This can be attributed to visa issues, as cohorts of consumers are not spending as much as before. Similar trends are now materializing in household products and personal care categories as well. While these sectors have been very resilient over the past three years, they are now beginning to show signs of a slowdown. The conditions are a head-scratcher, because these are the products consumers use every day. Thus, general uncertainty around a cohort of consumers, including visa holders and students, is beginning to materialize in the sector’s performance.
These trends have resulted in concerns about whether staples would be less of a safe haven this time around. Addressing these concerns, Spillane said that staples would still be a safe haven if we consider them relative to the world we are living in. Large liquid consumer staples are still a place investors would want to be if they are looking for a place to hide in uncertainty, as they are likely to generate considerable cash flows and pay dividends.
Our Methodology
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 20 household stocks. We then selected the top 12 with the highest number of hedge fund holders, as of Q4 2024, and ranked them in ascending order. We sourced the hedge fund sentiment data from Insider Monkey’s database.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A happy couple viewing the products of this household and personal product company in a mass merchandiser store.
The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 79
The Procter & Gamble Company (NYSE:PG) provides branded consumer packaged goods to consumers across the globe. Its operations are divided into Fabric & Home Care, Grooming, Beauty, Health Care, Feminine & Family Care, and Baby. The company boasts a strong portfolio of brands, which includes reputable names such as Head & Shoulders, Pantene, Old Spice, Olay, Herbal Essences, Safeguard, Tide, Always, Venus, Oral-B, Ariel, Crest, Tampax, and others.
The Procter & Gamble Company (NYSE:PG) sells its products in around 180 countries and territories. The company operates a long list of industry-leading brands across key consumer staples categories, which lends it a significant competitive advantage. Over the last decade, it has returned around $147.8 billion to shareholders: $67.9 billion through share buybacks and $79.9 billion via dividends. This reflects its strong model of operation.
The Procter & Gamble Company (NYSE:PG) has a strong innovation pipeline and is leveraging AI and advanced technologies to optimize media buying, advertising development, and supply chain operations. The Wall Street Journal’s Natasha Khan and Sharon Terlep report showed that the company overtook Unilever by focusing on its largest brands and improving their efficacy. The Procter & Gamble Company (NYSE:PG) is in the strongest position to weather a turbulent year among its competitors, according to the report. On March 17, Erste Group analyst Stephan Lingnau upgraded the company to Buy from Hold and reiterated its growth forecast, expected annual earnings per share, and anticipated sales growth of around 2% to 4%. According to Erste, the stock is attractively valued compared to the sector.
Overall, PG ranks 1st on our list of the best household stocks to buy according to hedge funds. While we acknowledge the potential of PG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.