In this article, we discuss the 12 consumer stock options to add to your retirement portfolio. If you wish to see more such stocks within our list, you can go directly to read the Retirement Stock Portfolio: 5 Consumer Stocks To Consider.
Economic downturns are a recurring occurrence, and the market has been predicting an impending recession for a considerable period. This anticipation stems from the inversion of the yield curve, which has persisted since July of the previous year. Historically, an inverted yield curve has often served as an indicator that a recession could be on the horizon. During challenging economic times, investors, especially those who are looking forward to a comfortable retirement, typically gravitate towards low-risk stocks that can provide reasonable returns amidst heightened uncertainties. Consequently, healthcare and consumer stocks are often the preferred choice when facing significant macroeconomic headwinds.
In July, Deloitte released its “State of the US Consumer” report, offering intriguing insights directly related to consumer spending and shedding light on budget planning and expenditure patterns in US households. The report indicated that, in June, the percentage of survey participants in the US who expressed concerns about their savings and postponed significant purchases due to inflation had diminished, thanks to a noticeable decline in inflation rates. Furthermore, the report highlighted a resurgence in “consumer spending intentions” in June, following a consistent decline over the past year.
The demand for consumer staples remains steady irrespective of economic conditions, with a relatively consistent quantity being purchased during both prosperous and challenging times. An illustrative trend comes from Hargreaves Lansdown’s data. During the peak of the stock market’s downturn amid the coronavirus pandemic, the FTSE All Share Index experienced a substantial decline of 29.5% by March 18, 2020. In stark contrast, within the same period, the consumer staples sector demonstrated a notably milder decrease of just 13.24%, highlighting its resilience even in the face of significant market challenges. This distinctive characteristic sets the consumer staples sector apart from consumer discretionary businesses such as restaurants, hotels, and apparel, as well as consumer durables, which encompass long-lasting items like furniture and electronics, and tend to be more sensitive to market fluctuations.
As highlighted in one of our earlier articles, the consumer staples sector delivered an impressive performance throughout 2022, despite the backdrop of heightened inflation. By December 9, 2022, the S&P Consumer Staples Select Sector index had achieved a notable gain of 0.37%, in stark contrast to the significant 16.17% decline reported in the broader S&P 500, as previously noted.
In analyzing the consumer staples industry, it’s valuable to consider the viewpoint of a global heavyweight in this sector, Walmart Inc. (NYSE: WMT), regarding the industry’s outlook for the present year. According to the company’s management:
These will again be a headwind in Q2 and to a lesser extent in Q3. As we lap these charges, we expect meaningful improvement in ROI in the back half of this year. When you look beyond these unique items, our underlying operational ROI is steadily moving higher. At our Investor Day in April, I said that we want our ROI to go up every year and I still believe that will be the case this year. Let me briefly reference key segment highlights for Q1. For Walmart U.S. comp sales were strong, up 7.4% reflecting higher store traffic trends as well as strong growth and store fulfilled pickup and delivery. From a category perspective, comp sales were driven by strong growth in food and health and wellness, partially offset by a decline in general merchandise sales.
Unseasonably cooler spring weather negatively impacted sales in certain seasonal hardline categories including lawn and garden. Gross margins decreased 41 basis points primarily due to ongoing pressure from category mix shifts. As mentioned previously, supply chain costs and transportation were lower as we lapped last year’s elevated levels. Inflation remained high, up low double-digits in food categories. It’s important to remember that while year-over-year inflation started to moderate as the quarter progressed, this is largely due to lapping higher levels from last year. On a two-year stack basis, food inflation remains over 20% and continues to pressure discretionary wallets. Share gains and grocery continued, including from higher income households as our strong price gaps resonate with customers who are increasingly prioritizing value and convenience.
In anticipation of an impending and unavoidable economic downturn, as suggested by numerous analysts, we’ve chosen to examine some of the top consumer staples stocks that could be well-suited for inclusion in a retirement portfolio. These selections include General Mills, Inc. (NYSE:GIS), Philip Morris International Inc. (NYSE:PM), Walmart Inc. (NYSE:WMT), and PepsiCo, Inc. (NASDAQ:PEP), among others.
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Our Methodology
For our list of the 12 best consumer stocks for a retirement portfolio, we selected stocks from the Consumer Staples Select Sector SPDR Fund based on the historical outperformance of consumer staple companies during economic downturns. Specifically, this article focuses on the Consumer Staples Select Sector SPDR Fund, which comprises 39 companies in the consumer services industry. To identify these stocks, we conducted a ranking analysis using data from Insider Monkey’s database, which tracks 910 hedge funds at the end of Q2, and ranked the companies accordingly
12. Sysco Corporation (NYSE:SYY)
Number of Hedge Fund Holders: 39
The largest wholesale food distributor in the US, Sysco Corporation (NYSE:SYY) is an American multinational corporation involved in marketing and distributing food products, smallwares, kitchen equipment and tabletop items to restaurants, healthcare and educational institutes.
Sysco Corporation (NYSE:SYY) announced a quarterly dividend of $0.50 per share on August 24, maintaining the same level as its previous dividend. The company stands out as one of the top consumer stocks on our list due to its remarkable track record of consistently increasing dividends over the past 54 years. As of October 18, the stock’s dividend yield was recorded at 3.05%.
The number of hedge funds tracked by Insider Monkey owning stakes in Sysco Corporation (NYSE:SYY) grew to 39 in Q2 2023, from 34 in the previous quarter. The overall value of these stakes is over $703 million. With over 1.5 million shares, Yacktman Asset Management was the company’s leading stakeholder in Q2.
Much like General Mills, Inc. (NYSE:GIS), Philip Morris International Inc. (NYSE:PM), Walmart Inc. (NYSE:WMT), and PepsiCo, Inc. (NASDAQ: PEP), Sysco Corporation (NYSE:SYY) ranks as a top-rated consumer stock.
11. Monster Beverage Corporation (NASDAQ:MNST)
Number of Hedge Fund Holders: 44
Monster Beverage Corporation (NASDAQ:MNST) is an American beverage company that engages in the development, marketing, sale, and distribution of energy drink beverages and concentrates including Monster Energy, Relentless and Burn.
Monster Beverage Corporation (NASDAQ:MNST) made an announcement in late July, stating that its subsidiary, Blast Asset Acquisition LLC, successfully finalized the acquisition of a significant portion of the assets belonging to Vital Pharmaceuticals, Inc., and select affiliates collectively known as “Bang Energy.” This acquisition was executed at an approximate purchase price of $362 million, subject to potential adjustments. The acquired assets encompass Bang Energy beverages and a beverage production facility located in Phoenix, Arizona.
Insider Monkey’s database of 910 hedge funds shows that 44 hedge funds had stakes in the company. The most significant stakeholder of the company was Neal C. Bradsher’s Broadwood Capital which owns a $535 million stake in the company.
10. General Mills, Inc. (NYSE:GIS)
Number of Hedge Fund Holders: 48
General Mills, Inc. (NYSE:GIS), is a multinational American company known for producing and marketing branded processed consumer foods distributed through retail outlets. The company was initially established on the shores of the Mississippi River, near Saint Anthony Falls in Minneapolis, where it initially garnered recognition as a major flour milling operation.
On September 21, RBC Capital adjusted its price target for General Mills, Inc. (NYSE:GIS), reducing it from $78 to $76, while maintaining a Sector Perform rating on the stock. According to the firm’s research note, the company’s Q1 results were relatively straightforward, with challenges in the Pet segment balanced by strong performance in the Foodservice and International sectors. Furthermore, the firm maintains its outlook for General Mills, Inc. (NYSE:GIS), anticipating organic net sales growth of 3% and EPS growth of 4% for FY24.
At the end of Q2 2023, 48 hedge fund investors had invested their capital in General Mills, Inc. (NYSE:GIS) according to the Insider Monkey database. The largest shareholder of General Mills, Inc. (NYSE:GIS) was Bridgewater Associates, which owned roughly 1.1 million shares with a value of about $81.6 million.
9. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 48
Constellation Brands, Inc. (NYSE:STZ) is a U.S.-based company engaged in the production and promotion of beer, wine, and spirits. As a Fortune 500 enterprise, Constellation holds the distinction of being the leading beer importer in the United States in terms of sales, and it commands one of the largest market shares among major beer suppliers.
Constellation Brands, Inc. (NYSE:STZ) achieved robust double-digit sales growth within its beer division, solidifying its leadership in both the beer and high-end market segments. In contrast, sales of wine and spirits experienced a slower performance. Notably, the company revised its earnings per share outlook for fiscal 2024, raising it to a range of $9.60 to $9.80, up from the previous range of $9.35 to $9.65. Within Constellation Brands, Inc. (NYSE:STZ)’s beer portfolio, sales grew by 12%, driven by an 8.7% increase in shipments. The Modelo brand family emerged as a standout performer, with Modelo Especial showing nearly 9% growth, while Modelo Chelada brands experienced growth exceeding 40%.
By June 30, 2023, Constellation Brands, Inc. (NYSE:STZ) had garnered interest from 48 hedge funds. Notably, Holocene Advisors emerged as the largest shareholder, possessing 797,000 shares of Constellation Brands, Inc. (NYSE: STZ), with a combined value of approximately $196.1 million.
8. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 54
Philip Morris International Inc. (NYSE:PM) is a multinational tobacco corporation of American origin, distributing its products in more than 180 countries worldwide. The company’s most renowned and top-selling product is Marlboro. Philip Morris International Inc. (NYSE:PM) is commonly recognized as one of the entities within the tobacco industry often referred to collectively as “Big Tobacco.”
Philip Morris International Inc. (NYSE:PM) announced a quarterly dividend of $1.30 per share on September 13, reflecting a 2.4% uptick from the previous dividend of $1.27. This dividend was paid to shareholders on October 12, with the record date for eligible shareholders set at September 27.
According to Insider Monkey’s second quarter database, 54 hedge funds were bullish on Philip Morris International Inc. (NYSE:PM), compared to 55 funds in the last quarter. Terry Smith’s Fundsmith LLP is one of the major stakeholders of the company, with 15.8 million shares worth $1.54 billion.
Ariel International Fund made the following comment about Philip Morris International Inc. (NYSE:PM) in its Q1 2023 investor letter:
“Finally, tobacco maker, Philip Morris International Inc. (NYSE:PM) declined in the period on concerns related to supply-chain disruptions resulting from the war in Ukraine, which we view as temporary. We believe the favorable economics and margin expansion associated with market share gains from the IQOS brand and Reduced Risk Products should yield value creation opportunities in the years ahead. Furthermore, at current trading levels, we think the company’s operating leverage, pricing power, and free cash flow profile offer a margin of safety.”
7. Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Fund Holders: 55
Mondelez International, Inc. (NASDAQ:MDLZ), branded as Mondelēz International, is a Chicago-based multinational company specializing in confectionery, food, beverage, and snack food. With an annual revenue of approximately $26 billion, Mondelez conducts its business in roughly 160 countries. At present, Mondelez International, Inc. (NASDAQ:MDLZ) offers a quarterly dividend of $0.425 per share. Notably, the company has consistently increased its dividends for the past nine years. As of October 18, the stock boasts a dividend yield of 2.65%.
In Q2 2023, the count of hedge funds in Insider Monkey’s database holding positions in Mondelez International, Inc. (NASDAQ:MDLZ) increased to 55, up from 51 in the preceding quarter. The total value of these holdings now exceeds $1.74 billion. Among these hedge funds, Holocene Advisors was the company’s leading stakeholder in Q2.
6. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 58
Colgate-Palmolive Company (NYSE:CL) is a multinational corporation headquartered in the heart of Midtown Manhattan, New York City, situated along Park Avenue. The company’s primary focus centers on the manufacturing, distribution, and offering of an array of household, healthcare, personal care, and veterinary products.
On September 14, the company announced a quarterly dividend of $0.48 per share, maintaining consistency with its previous dividend. Impressively, Colgate-Palmolive Company (NYSE:CL) has consistently raised its dividends for a remarkable streak spanning 61 consecutive years. As of October 18, the stock boasted a dividend yield of 2.62%.
Insider Monkey’s database for the second quarter of 2023 revealed that out of 910 profiled hedge funds, 58 held positions in Colgate-Palmolive Company (NYSE:CL). The largest stockholder was First Eagle Investment Management, possessing 11.1 million shares of Colgate-Palmolive Company (NYSE:CL) with a combined value of $854.6 million.
Similar to General Mills, Inc. (NYSE:GIS), Philip Morris International Inc. (NYSE:PM), Walmart Inc. (NYSE:WMT), and PepsiCo, Inc. (NASDAQ:PEP), Colgate-Palmolive Company (NYSE:CL) is one of the best consumer stocks to invest in.
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Disclosure: None. Retirement Stock Portfolio: 12 Consumer Stocks To Consider is originally published on Insider Monkey.
