We recently published a list of 12 Best FMCG Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Colgate-Palmolive Company (NYSE:CL) stands against other best FMCG stocks to buy according to hedge funds.
Consumer Staples Outlook For 2025
Consumer staples refer to essential daily-use products such as packaged food, toothpaste, and dish detergent. These products often run out quickly off the supermarket shelves and are considered “defensive” because consumers continue to purchase these necessities even during economic downturns. Moreover, consumer staple companies are mostly mature dividend payers.
On December 10, 2024, Ben Shuleva, Fidelity Sector Portfolio Manager shared his outlook for the sector in a report published on Fidelity Investments. The consumer staples sector had a positive year but lagged behind the broader market due to investors favoring higher-growth stocks. The high interest rates and concerns about GLP-1 weight-loss drugs affecting food consumption also impacted performance negatively. However, despite these challenges, the sector still posted strong absolute gains. Compared to the S&P 500 index the consumer staple sector gained 16.7% on a year-to-date basis as of December 9, whereas the S&P 500 index gained 26.9% during the same time.
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Ben Shuleva from Fidelity Investments anticipates a return to normalcy for the consumer staples sector in 2025. He suggests this based on a broadly stable economic environment with healthy employment and steady real wage growth. In addition, the Fed is expected to begin cutting interest rates, which could boost dividend-paying stocks. Lastly, consumer spending has remained strong and is expected to remain resilient in 2025, thereby indicating positive sales growth for the sector. Shuleva anticipates that these factors will lead the sector to outperform the broader market in 2025. However, there could be a few uncertainties that could hamper the growth trajectory. The new presidential administration may introduce changes in tariff policies, which could affect certain consumer staples products. Although most consumer staples are manufactured domestically, so the direct impact of tariffs might be limited. Moreover, a strengthening US dollar can negatively affect consumer staples companies with international operations by reducing their foreign earnings when converted back into dollars. Shuleva emphasizes focusing on core fundamentals when investing in consumer staple companies, such as those operating in favorable market structures and maintaining strong underlying growth profiles.
Our Methodology
To complete the list of the 12 best FMCG stocks to buy according to hedge funds, we used the Consumer Staples Select Sector SPDR Fund and Vanguard Consumer Staples ETF. We selected pure-play Fast-Moving Consumer Goods-producing companies from the holdings of these two ETFs and ranked them in ascending order of the number of hedge funds that held stakes in them at the close of the third quarter. The number of hedge funds was sourced from Insider Monkey’s third-quarter 2024 database.
Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An array of toothpaste, toothbrushes, and mouthwashes on a bright background, highlighting the company’s oral care products.
Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 54
Colgate-Palmolive Company (NYSE:CL) is an international producer of consumer staple products ranging from oral care, personal care, and home care, to pet nutrition. During the fiscal fourth quarter of 2024, the company delivered a revenue of $4.9 billion which was slightly lower than what it delivered in the same quarter last year and also missed the market expectation by $44.53 million. This led Stifel to lower the price target on the stock from $95 to $93, while the firm kept its Hold rating. However, Andrea Faria Teixeira from J.P. Morgan kept the Buy rating with the price target of $97.
On the bright side, Colgate-Palmolive Company (NYSE:CL) achieved over $20 billion in net sales for the fiscal year, which is one year ahead of its strategic timeline. The company was able to achieve this milestone due to six consecutive years of organic sales growth. Management has significantly increased advertising spending by almost 15% and is also working on improving innovation capabilities. As a result, the incremental sales from innovations have grown by 45% from 2021 to 2024. Looking ahead, Colgate-Palmolive Company (NYSE:CL), expects net sales to be roughly flat for the current year, mainly due to the foreign exchange impact. However, management expects organic sales growth to be within its long-term targeted range of 3% to 5%.
Overall, CL ranks 5th on our list of best FMCG stocks to buy according to hedge funds. While we acknowledge the potential of CL to grow, 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 CL 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.
