12 Best FMCG Stocks to Buy Now

Published on July 19, 2022 at 9:55 am by Affan Mir in Hedge Funds, News

In this article, we discuss 12 best FMCG stocks to buy now. If you want to skip our detailed analysis of the FMCG sector, go directly to 5 Best FMCG Stocks to Buy Now.

FMCG or Fast-Moving Consumer Goods are products that move and sell quickly and at relatively low costs. Due to high consumer demand, these products mostly have a short shelf life. They include beverages, confectionery, personal care and hygiene products, and perishables like meat and dairy. According to Allied Market Research, the global FMCG market is expected to reach $15,361.8 billion by 2025, indicating a CAGR of 5.4%. In 2017, the food and beverages segment covered 89% of the global FMCG market share and is expected to grow at a CAGR of 5.3% by 2025. Furthermore, the healthcare segment is expected to show an 8.5% CAGR during the forecast period and the personal care segment is forecasted to demonstrate a CAGR of 5%.

Investing in FMCG Stocks

Consumer goods are bought by people irrespective of the condition of the economy. These stocks are safest to invest in, especially during times of recession. As the global pandemic pushed the world into a recession, the FMCG market remained stable. During the early impact of COVID-19, in North America, packaged food sales rose by 32%, frozen foods by 27%, dairy by 26%, and the lowest sales growth of 6% were recorded for paper products.

In 2020, revenues from operations, trading, and investments for the 50 largest global FMCG companies rose by 3.9%, compared to 3.4% in the prior year. These companies generated over $1 trillion in sales. Kellogg Company (NYSE:K) saw a 10.3% YoY growth and Conagra Brands, Inc. (NYSE:CAG) recorded a 20.2% YoY growth. The highest growth was recorded by the Brazilian Marfrig Group at 64.1%.

Furthermore, most FMCG companies remain stable and have been operating for decades, sometimes more than a century. A lot of these companies also pay stable and long-term dividends. Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and PepsiCo, Inc. (NASDAQ:PEP) are some of the major players in the FMCG sector.

Our Methodology

These stocks were picked after a careful assessment of the FMCG sector. The factors considered were analyst ratings, shareholder returns in the form of capital gains, dividends, share repurchases, and growth prospects such as mergers, acquisitions, and projects that might prove to be a growth catalyst for the company.

The hedge fund sentiment was used to rank the companies in an ascending order and was taken from Insider Monkey’s Q1 2022 database.

Photo by NeONBRAND on Unsplash

Best FMCG Stocks to Buy Now

12. Sysco Corporation (NYSE:SYY)

Number of Hedge Fund Holders: 31

Sysco Corporation (NYSE:SYY) is the world’s largest distributor of food products, smallwares, kitchen equipment, and tabletop items to restaurants, schools, hospitals, and other hospitality businesses. In the US, the food-away-from-home is a $300 billion industry, and Sysco Corporation (NYSE:SYY) has a 17% market share in it.

Sysco Corporation (NYSE:SYY) has been increasing its dividend rate for the past 54 years. In the last 5 years, the dividend growth rate has been 7.89%. The company has a dividend yield of 2.31%, and the latest increase was declared on April 28, 2022, from $0.37 to $0.49, to be paid out on July 22. The dividend will be paid out to the shareholders of record on June 30.

On June 29, Barclays analyst Jeffrey Bernstein raised Sysco Corporation (NYSE:SYY)’s price target to $102 from $97 with an Overweight rating on the company shares. This upgrade was made after the analyst met with the company management and noted that with the recession looming around the corner and “defensive positioning top of mind,” Sysco Corporation (NYSE:SYY) is well-positioned.

11. Darling Ingredients Inc. (NYSE:DAR)

Number of Hedge Fund Holders: 34

Darling Ingredients Inc. (NYSE:DAR), formerly Darling International Inc., is involved in producing and distributing natural ingredients from various edible and inedible bio nutrient sources. On April 25, Cowen analyst Jason Gabelman initiated coverage of Darling Ingredients Inc. (NYSE:DAR) with an $80 price target and a Market Perform rating, citing the rising price of vegetable oil and a growing renewable diesel footprint as profitable for the company.

According to the Insider Monkey database, the hedge sentiment was positive towards Darling Ingredients Inc. (NYSE:DAR), as 34 hedge funds were bullish on the company in the first quarter of 2022, compared to 29 funds in the previous quarter. In Q1 2022, Impax Asset Management was the most significant stakeholder in the company, with approximately 3.7 million shares valued at $296.2 million.

On May 5, Darling Ingredients Inc. (NYSE:DAR) announced the acquisition of the FASA group, Brazil’s largest independent rendering company, for $560 million. The company processes 1.3 metric tonnes annually, which will make a healthy addition to Darling Ingredients Inc. (NYSE:DAR)’s revenue growth.

Darling Ingredients Inc. (NYSE:DAR) was mentioned in the first-quarter 2022 letter of Aristotle Capital Management. Here is what it said:

“Darling posted a strong recovery in the first quarter, rising on higher Diesel prices and strong demand for proteins and feedstocks. Furthermore, the Company continues to expand production in its Diamond Green Diesel (DGD) joint venture with Valero. Cash flows are expected to grow meaningfully next year, as the DGD 3 plant is expected to come online in Port Arthur Texas in the first half of 2023, bringing DGD total renewable diesel production capacity up to 1.2 billion gallons per year.”

10. General Mills, Inc. (NYSE:GIS)

Number of Hedge Fund Holders: 37

General Mills, Inc. (NYSE:GIS) is a global consumer foods manufacturer. As of July 19, the company’s stock has gone up 10% year to date. According to our database, 37 hedge funds had a stake in General Mills, Inc. (NYSE:GIS) with a combined value of $819.57 million. In the previous quarter, the number was down to 36 with a total stake of $781.367 million.

General Mills, Inc. (NYSE:GIS) has a dividend yield of 2.83%. As of August 1, General Mills, Inc. (NYSE:GIS) will pay a quarterly dividend of $0.54, portraying a 6% increase from the previous quarterly dividend of $0.51. Moreover, the company plans to return 80% to 90% of its free cash flow to its shareholders through dividends and repurchases. In the first three quarters of FY2022, the company repurchased 8.8 million shares worth $550 million.

General Mills, Inc. (NYSE:GIS) was mentioned by Miller Howard Investments in its Q3 2021 investor letter. Here is what the firm said:

“Other stocks providing balance against our cyclicals include General Mills (GIS). They pay good dividends supported by stable business models and have a conservative amount of debt. The dividend yield on our Income-Equity Strategy is now 3.6%. The No-MLP version yield is 3.5%. Both yields are roughly 2.5 times the yield on the S&P 500 Index, and we are seeing dividend increases across our portfolios. Our income advantage over the broad market is significant, yet we also believe that we have enough cyclical tilt to perform well in a recovery. We continue to monitor a variety of risks, with inflation and COVID-19 trends being most important.”

9. Church & Dwight Co., Inc. (NYSE:CHD)

Number of Hedge Fund Holders: 39

Church & Dwight Co., Inc. (NYSE:CHD) is a household products manufacturer headquartered in New Jersey. The company’s most famous products come under its Arm & Hammer line, including baking soda, detergents, and toothpaste.

On June 28, Wells Fargo analyst Chris Carey raised Church & Dwight Co., Inc. (NYSE:CHD)’s price target to $100 from $95 with an Overweight rating on its shares. The analyst suggests that the company is still relatively defensive despite several mergers and acquisitions.

As of July 7, Church & Dwight Co., Inc. (NYSE:CHD) has gained 9.84% in the last twelve months. For the same period, the company’s operating cash flow was recorded at $1.046 billion compared to $993.8 million in the previous year. The free cash flow was recorded at $938.3 million, compared to $875 million in the previous year.

Since 1976, the dividend growth rate of Church & Dwight Co., Inc. (NYSE:CHD) has averaged 12.4%. Moreover, the net-income payout and the free cash flow payout ratio for the past decade have been around 36% and 31%, respectively. Church & Dwight Co., Inc. (NYSE:CHD) has a 1.11% dividend yield, with an annual dividend of $1.06.

8. The Hershey Company (NYSE:HSY)

Number of Hedge Fund Holders: 40

The Hershey Company (NYSE:HSY) is an American multinational company that produces chocolates, beverages, baked goods, and other confectionery items. In December 2021, The Hershey Company (NYSE:HSY) acquired Dot’s Pretzels and Pretzels Inc., which proved to be successful for the company’s North America Salty Snacks segment. The acquisitions were mainly responsible for revenues rising 87% YoY to $226 billion.

On April 29, BMO Capital analyst Kenneth Zaslow raised the price target of The Hershey Company (NYSE:HSY) stock to $255 from $215 and maintained an Outperform rating on the shares. The analyst attributed it to the solid first-quarter earnings results due to the various acquisitions, an unexpected demand elasticity, and surprising stock replenishment. Zaslow called the stock a “compelling investment” and highlighted the implied 9% sales growth and mid single-digit EPS growth due to the company’s guidance.

7. Mondelez International, Inc. (NASDAQ:MDLZ)

Number of Hedge Fund Holders: 48

Mondelez International, Inc. (NASDAQ:MDLZ) is an American confectionery, food, and beverage company with operations in more than 160 countries. Its most famous brands include Cadbury, Oreo, Toblerone, and Trident, among many others. According to the Insider Monkey database, 48 hedge funds had stakes in Mondelez International, Inc. (NASDAQ:MDLZ) in the first quarter of 2022, compared to 40 in the previous quarter. In Q1 2022, Diamond Hill Capital was the most significant stakeholder, with total shares valued at $437.727 million.

Mondelez International, Inc. (NASDAQ:MDLZ) reported Q1 2022 earnings by outperforming the EPS estimates of $0.75 after reporting $0.84. Revenue exceeded the estimates by $291.92 million at $7.76 billion. The reports also revealed a 7% organic sales growth compared to the previous quarter. Moreover, Mondelez International, Inc. (NASDAQ:MDLZ) recorded cash and cash equivalents of $1.95 billion and FCF of $3.18 billion.

Mondelez International, Inc. (NASDAQ:MDLZ)’s dividend payout makes it an attractive FMCG stock. The company has a dividend yield of 2.25% and the most recent dividend of $0.35 was paid out on July 14. Moreover, the company has recorded a 5-year growth rate of 13%.

6. Colgate-Palmolive Company (NYSE:CL)

Number of Hedge Fund Holders: 50

Colgate-Palmolive Company (NYSE:CL) is a global manufacturer and provider of consumer products. In March, the company announced the authorization of a share repurchase program of up to $5 billion.

According to the Insider Monkey database, in the first quarter of 2022, 50 hedge funds held stakes in the company worth $2.59 billion, compared to 48 funds in the previous quarter. In the first quarter of 2022, the biggest stakeholder in Colgate-Palmolive Company (NYSE:CL) was the New York-based First Eagle Investment Management, with 11.2 million shares worth $856.6 million.

Colgate-Palmolive Company (NYSE:CL) has a dividend yield of 2.37% and its annual payout is $1.88. The company has been paying dividends to its shareholders since 1895 and has increased its payout for 59 years.

Colgate-Palmolive Company (NYSE:CL) is also one of the major names in the FMCG sector, in addition to Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and PepsiCo, Inc. (NASDAQ:PEP).

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