We recently published a list of 10 Consumer Stocks to Buy for a Retirement Portfolio. In this article, we are going to take a look at where Lamb Weston Holdings Inc. (NYSE:LW) stands against other consumer stocks to buy for a retirement stock portfolio.
Today’s retirees face growing uncertainty about the future of Social Security. While many financial advisors and economists specializing in Social Security recommend delaying retirement benefits until age 70 to maximize monthly payouts, only 10% of pre-retirees intend to wait until that age, according to the Schroders 2024 U.S. Retirement Survey. A large majority plan to claim benefits earlier, often before reaching their full retirement age of 67 (for those born in 1960 or later). Specifically, 43% of non-retirees plan to file before 67, with 23% intending to claim at 65 and 12% planning to claim as early as 62. This trend is further influenced by financial insecurity. According to the Transamerica Institute, only 1 in 5 middle-class individuals feel confident in their ability to retire comfortably or maintain their lifestyle during retirement.
According to the Bureau of Labor Statistics, the consumer price index (CPI), which tracks the average change in prices for consumer goods and services, rose 2.6% year-over-year in October. This marks an increase from the 2.4% annual growth rate recorded in September. Month-over-month, prices grew by 0.2%, matching consensus expectations and maintaining the same pace observed over the past three months. However, President-elect Donald Trump’s proposed policies, including increased tariffs and expanded government spending, could stimulate economic growth while also exacerbating inflationary pressures. Despite inflation easing from its peak in mid-2022, it continues to weigh heavily on U.S. households.
Job creation in October slowed to its weakest pace since late 2020, reflecting the impact of storms in the Southeast and a major labor strike. Nonfarm payrolls rose by just 12,000, a sharp decline from September and far below the Dow Jones estimate of 100,000. October’s report marked the smallest monthly gain since December 2020. Despite the weak job growth, the unemployment rate held steady at 4.1%, meeting expectations. A broader measure of unemployment, which accounts for discouraged workers and those in part-time roles for economic reasons, also remained unchanged at 7.7%. The Bureau of Labor Statistics noted that the Boeing strike likely accounted for a loss of 44,000 jobs in the manufacturing sector, which saw an overall reduction of 46,000 positions. Federal Reserve Chair Jerome Powell, speaking on the labor market early in November, expressed concerns regarding the labor market:
“The labor market has cooled a great deal from its overheated state of two years ago and is now essentially in balance. It is continuing to cool, albeit at a modest rate, and we don’t need further cooling.”
These developments have raised concerns at the Federal Reserve, as cracks in the labor market emerge even as year-over-year inflation moderates. Elevated interest rates, implemented to combat inflation, could pose risks to the labor market and broader economic growth. In response to these challenges, the Fed took the unusual step in September of lowering its benchmark short-term interest rate by half a percentage point—twice the typical quarter-point adjustments policymakers prefer—despite the economy still expanding.
READ ALSO: Retirement Stock Portfolio: 12 Safe Tech Stocks To Consider.
Although workers’ and retirees’ confidence in achieving a financially secure retirement hasn’t fully recovered from the sharp decline in 2023, there are encouraging signs of recovery, according to the Employee Benefits Research Institute (EBRI). The EBRI’s 2024 Retirement Confidence Survey revealed that 68% of workers and 74% of retirees feel confident about having sufficient funds to live comfortably throughout retirement. These figures show modest improvement from 2023, when 64% of workers and 73% of retirees expressed similar confidence. However, inflation remains a significant concern, with 31% of workers and 40% of retirees citing it as a key reason for their lack of confidence. On a positive note, about 80% of workers see the SECURE 2.0 Act of 2022’s provision for employer-sponsored emergency savings accounts as a valuable benefit. Recent guidance from the Department of Labor and IRS has also provided clarity on how plan sponsors can integrate these emergency savings accounts into their offerings.
During economic turbulence, investors often turn to low-risk stocks that offer stable returns in the face of heightened uncertainty. In that regard, consumer staples stocks typically emerge as a favored option during such periods, given their ability to weather macroeconomic challenges. The demand for essential goods remains steady regardless of economic conditions, as consumers maintain consistent purchasing habits in both good times and bad.
Potatoes being sorted on a conveyor belt in a modern packing facility.
Our Methodology
To compile our list of the 10 best consumer stocks for a retirement portfolio, we focused on companies within the Consumer Staples Select Sector SPDR Fund. These companies were chosen for their historical resilience during economic downturns and well-established operations. Additionally, we prioritized consumer stocks that offer stable dividend yields, supported by sustainable payout ratios (less than 70%) and a proven history of dividend payments. The selected stocks were ranked based on their hedge fund sentiment, as of Q3 2024.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Lamb Weston Holdings Inc. (NYSE:LW)
Dividend Yield: 1.89%
Number of Hedge Fund Holders: 37
Lamb Weston Holdings Inc. (NYSE:LW) is a leading food processing company and one of the world’s largest producers of frozen potato products, including French fries, waffle fries, and other frozen offerings. The company primarily serves restaurant chains and food service distributors, with retail sales contributing less than 20% of its revenue.
On October 18, Citi raised its price target for Lamb Weston Holdings Inc. (NYSE:LW) from $76 to $90 while maintaining a Buy rating. This update followed activist filings by JANA Partners, which disclosed a 5.0% stake in the company, and Continental Grain, holding a 0.4% interest. Citi expressed optimism about Lamb Weston’s growth prospects, citing fundamental improvements such as volume recovery, enhanced operating leverage, and a more favorable pricing environment as key drivers for potential share price appreciation in the coming year.
For Q1 fiscal year 2025, Lamb Weston Holdings Inc. (NYSE:LW) reported mixed results. While total sales experienced a slight 1% year-over-year decline, the company exceeded expectations on sales performance due to a better volume and price mix. Adjusted EBITDA for the quarter came in at $290 million, reflecting solid operational execution despite broader challenges.
Diamond Hill Long-Short Fund stated the following regarding Lamb Weston Holdings, Inc. (NYSE:LW) in its Q2 2024 investor letter:
“Still-rising valuations have made identifying attractively valued, long ideas increasingly challenging — though we still found a few in Q2 that we believe the market is overlooking amid its increasingly narrow focus on the mega-cap technology stocks dominating the major indices. We established new long positions in VeriSign, Ulta Beauty, Sysco Corporation and Lamb Weston Holdings, Inc. (NYSE:LW) during the quarter.
Lamb Weston is the US’s leading supplier of frozen French fries. Shares have been pressured amid a slowdown in quick-service restaurant traffic — which gave us a compelling opportunity to capitalize on what we consider a large dislocation in price and intrinsic value.”
Overall, LW ranks 7th on our list of consumer stocks to buy for a retirement stock portfolio. While we acknowledge the potential of LW, our conviction lies in the belief that certain 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 LW 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.