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 Church & Dwight Co., Inc. (NYSE:CHD) 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.
READ ALSO: 10 Best Strong Buy Stocks To Buy Right Now and 10 Best Vegan Stocks to Buy According to Analysts.
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 supermarket aisle filled with Household and Personal Care Products.CHD
Church & Dwight Co., Inc. (NYSE:CHD)
Number of Hedge Fund Holders: 38
Church & Dwight Co., Inc. (NYSE:CHD) manufactures, develops, and markets a range of personal care, consumer household, and specialty products. The company operates in the Consumer Domestic, Consumer International, and Specialty Products Division (SPD) segments. The Consumer Domestic segment offers household products, while the Consumer International segment offers personal care, household, and over-the-counter products in international subsidiary markets.
Church & Dwight Co., Inc. (NYSE:CHD) exceeded its sales growth outlook in fiscal Q4 2024, reporting a 4.1% net sales increase in fiscal year 2024 compared to the company’s outlook of around 3.5%. It drove strong consumer demand across its geographies and portfolios in fiscal year 2024, with organic sales increasing by 4.6%. The primary driver of organic growth was volume, which Church & Dwight Co., Inc. (NYSE:CHD) expects to continue in fiscal year 2025.
These positive results reflect the strength of the company’s brands, the success of its new and innovative products, and the benefits of its continued focus on execution. The company also reported strong cash flow generation, with over $1.1 billion of cash from operations in fiscal year 2024. This growth was attributed to margin expansion, strong sales, and efficient working capital management.
On February 21, Analyst Christopher Carey of Wells Fargo maintained a Buy rating on Church & Dwight Co., Inc. (NYSE:CHD), reducing the price target to $115.00. He gave the company a Buy rating due to its strong market position and its demonstration of robust consumption trends. In addition, the company’s strategic investments and innovations, proactive engagement in mergers and acquisitions, and healthy cash reserves are anticipated to drive future growth, according to the analyst. In another report released on February 5, Argus Research analyst Taylor Conrad also reiterated a Buy rating on the company.
Overall, CHD ranks 6th on our list of the best household stocks to buy according to hedge funds. While we acknowledge the potential of CHD 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 CHD 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.
