Consumer stocks have been a mixed bag for investors in the stock market. Of course, the coronavirus pandemic has wreaked havoc on many businesses. As bad as these impacts could be, there are always a few that would outperform its industry peers. That means there are still opportunities in the consumer sector. Sometimes, they are just harder to find. Admittedly, second-quarter earnings were anticipated to be discouraging. But still, there were some that have beaten analysts’ expectations. And as we kick off another earnings season, certain investors are betting on some top consumer stocks that could potentially outperform their rivals.
Investors have many reasons to follow some of the top consumer stocks in the stock market today. Companies that manufacture or sell essential products like tissue papers, disinfecting sprays, and cleaning supplies are typically resistant to recessions. And during an unprecedented time like this, their appeal has been bolstered by spiking demand to stay hygienic to avoid contracting the novel coronavirus.
That means that big retailers are a big deal as they supply consumer staples products. Companies like Walmart (WMT Stock Report) and Kroger (KR Stock Report) are perfect examples that saw their revenue skyrocketed as a result of the pandemic. With consumer behavior suddenly altered in such a big way, many consumer staples are proving to be valuable especially during the pandemic. Many consumer staples companies are making a recovery. In-store sales are still steady if not higher. People will still need to stock up on food and drinks when they go to the supermarket. This means that some consumer companies can still continue to do well despite the pandemic. With this in mind, are the following the best consumer stocks to buy or avoid right now?
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Coca-Cola (KO Stock Report) has been hit hard by the coronavirus pandemic when most outdoor activities came to a screeching halt. As a significant portion of its business comes from people buying its products at major sporting events, movie theaters, and restaurants, you could have guessed how much of an impact the novel coronavirus has on major beverage companies like Coca-Cola. While it has been putting in a lot of effort to get their operations in place and get back to growth, KO stock is still down 8.62% year-to-date. And for long term investors, would the decline in KO stock provide a nice setup for investors to take advantage of the cheap price?
In order to optimize its business for growth and scale in the face of the pandemic, The Coca-Cola Company is now realigning its portfolio, removing from its offerings some of the weaker performing beverages. Investors are hoping that the company’s third-quarter earnings, due on October 22, will be a repeat of its better-than-expected results over the summer. I would guess there’s a good chance the revenue will still be weak. But many are hoping that the restructuring plan will improve business efficiency moving forward.
“We’re challenging ourselves to think differently about our brands to accelerate our transformation to a total beverage company…This isn’t about paring down to a specific number of product offerings under our brands. The objective is to drive impact and growth. It’s about continuing to follow the consumer and being very intentional in deciding which of our brands are most deserving of our investments and resources, and also taking the tough but important steps to identify those products that are losing relevance and therefore should exit the portfolio.”– Cath Coetzer, Coca Cola Global Head of Innovation and Marketing Operations.Top Consumer Stocks To Buy [Or Sell] Right Now: Clorox
Household name Clorox (CLX Stock Report) has certainly benefited from the pandemic hoarding. Many consumers rushed to stock up on its disinfecting wipes. After all, the public was cautious about contracting the virus and therefore wanted to be squeaky clean. The company is slated to report its third quarter-financial result on November 2.
The demand for the company’s product was overwhelming, to say the least. The demand was so huge that the backlog is until next year. The company has to expand its business to a third-party contractor network to fill up the gap from the massive surge in demand. Of course, no one knows how much further the pandemic will go on. And that means the demand for Clorox’s products may taper off soon. Even if the pandemic stays on, some consumers probably realized that they had already purchased too many cleaning products earlier this year. The company, of course, isn’t a one-trick pony as it owns some of the top-selling brands in the home care and personal care segments. 80% of the company’s revenue comes from market-leading brands like Pine-Sol, Formula 409, Burt’s Bees, and Clorox bleach.
Clorox is a stalwart among consumer goods companies. The stock remains a favorite among investors. That is not surprising, as the company has raised its dividend every year for over 5 decades. Not too shabby if you ask me. Of course, good things don’t come cheap. If you are looking for something to make your portfolio sparkle, could CLX stock fit the bill?Top Consumer Stocks To Buy [Or Sell] Right Now: Dollar General
Many retailers are struggling because of the coronavirus pandemic. But that’s not the case with Dollar General (DG Stock Report) as the company seems to be flourishing with its deep discount model. It’s not surprising considering the latest unemployment data is still on the high side. This shows that millions of people will still be very conscious of their spending. And DG stock is poised to benefit in such a weak economic climate. During the last recession over a decade ago, the dollar stores were among the key beneficiaries. Yet, many consumers who shop at these stores stick around even after the economy recovered. They must have realized the value of such stores and thus kept going back.
Can investors expect history to repeat itself with the newer consumers coming to the market during this global health crisis? Dollar General has made big investments in offering more varieties to make the deep discount dollar store a more attractive option compared to the local retailers. The company has been very strategic in location planning. It has set up stores closer to where consumers live. This also avoids competing head-on with Walmart.
Many analysts expect Dollar General to grow its earnings at double-digit percentages over the next couple of years. The stock is trading at an undemanding valuation of just 1.5 times sales. Perhaps, DG stock can offer as good a value as its products. The company expects to report its third quarter earnings on December 3. Amid the backdrop of high unemployment rates, it’s reasonable to assume DG stock would continue to thrive this quarter.