We recently compiled a list of the 14 Best FMCG Stocks To Buy Now. In this article, we are going to take a look at where Mondelez International, Inc. (NASDAQ:MDLZ) stands against the other FMCG stocks.
If you walk into a modern pantry, you’re almost guaranteed to find it well-stocked with everyday essentials like toilet paper, soap and toothpaste, beverages, and food. This reflects a simple reality: most consumers prefer to keep these items in ample supply. While consumers will always demand these products, they are not entirely indifferent to price increases during inflation. Instead, they might look to save money by buying in bulk or shopping at big-box stores. Regardless, they will continue to prioritize purchasing these necessities.
Known as fast-moving consumer goods (FMCG) or consumer packaged goods (CPG), these high-demand products are valued for their affordability and rapid turnover. They are considered “fast-moving” because they quickly sell off store shelves due to their regular use by consumers. Although investors typically look towards bonds and cash to manage risk, FMCG stocks offer a defensive alternative that can provide both growth and income. While these stocks may not generate spectacular growth opportunities and can lose value as interest rates rise, they generally decline less than other sectors during recessions. In fact, certain industries, such as food, tobacco, and alcohol, may even experience increased demand during economic downturns. As one of the world’s largest industries, the global FMCG sector has seen steady growth over the past decade, driven by the trend of experiential retailing, where shopping is viewed as a social activity. The global FMCG market is projected to reach $18,939.4 billion by 2031, with a compound annual growth rate (CAGR) of 5.1% from 2022 to 2031.
Following low deal volume and value in 2020, the consumer goods landscape saw a significant shift in M&A activity. In 2021, as sizable assets in the sector became scarce and prohibitively expensive, companies strategically moved toward a higher-volume, lower-deal-value approach. According to McKinsey, this trend peaked in 2021 with around 470 consumer goods deals globally. The distribution of M&A activity varied across subsectors regarding volume and value. Food remained the largest category by deal volume, accounting for about 40%, while beverages and durables together made up an additional 30%. On the other hand, in terms of deal value, personal care led the pack with 38%, primarily driven by large spin-offs of pharmaceutical companies’ consumer businesses. A notable example includes Johnson & Johnson’s $42 billion spin-off of Kenvue last year.
As of late May, several major retailers have reported their Q1 2024 earnings, offering valuable insights into the current state of the U.S. consumer’s sentiments. With consumer spending accounting for approximately 70% of the U.S. economy, shifts in spending patterns significantly impact growth and employment. Walmart, for example, observed changes in customer behavior, with CFO John Rainey noting in the company’s Q1 earnings call:
“Many consumer pocketbooks are still stretched, and we see the effect of that in our business mix as they’re spending more of their paychecks on non-discretionary categories and less on general merchandise. This merchandise mix remains a headwind to margins, but it’s consistent with our expectations.”
This indicates that consumers are prioritizing essential groceries over discretionary items like televisions. Walmart’s earnings suggest that while overall consumer spending remains steady, those with less disposable income are struggling and continue to seek value in their purchases. In any case, despite inflation and challenging market conditions, people still need to eat and buy essentials, making FMCG stocks more resilient compared to other sectors in the stock market.
Our Methodology
After a comprehensive analysis of FMCG stocks listed on NYSE and NASDAQ using ETFs and internet rankings, we have curated a selection of the 14 top FMCG stocks to buy now according to hedge fuds.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 best hedge funds. Our quarterly newsletter’s strategy picks 14 small and large-caps every quarter and it has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A colourful array of products like candies, chocolates and gums on a supermarket shelf.
Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Fund Holders: 53
Mondelez International, Inc. (NASDAQ:MDLZ), branded as Mondelēz International, is a Chicago-based multinational company specializing in confectionery, food, beverages, and snack foods. Currently, Mondelez International, Inc. (NASDAQ:MDLZ) offers a quarterly dividend of $0.43 per share and has consistently increased its dividends for the past nine years.
Earlier this May, Mondelez International, Inc. (NASDAQ:MDLZ) reported strong first-quarter earnings that exceeded analyst expectations. The snack food giant posted an adjusted earnings per share (EPS) of $0.95, beating the consensus estimate of $0.89 by $0.06. Revenue came in at $9.29 billion, surpassing analysts’ forecast of $9.17 billion.
Despite the positive earnings, Mondelez International, Inc. (NASDAQ:MDLZ)’s outlook for 2024 reflects a cautious approach amid a volatile geopolitical environment. The company anticipates organic net revenue growth of 3% to 5% and high single-digit adjusted EPS growth on a constant currency basis, factoring in the 2023 adjusted EPS, which includes the developed market gum business.
In Q1 2024, the number of hedge funds in Insider Monkey’s database holding positions in Mondelez International, Inc. (NASDAQ:MDLZ) increased to 53, up from 51 in the previous quarter. The total value of these holdings now exceeds $966 million, with Bridgewater Associates emerging as the company’s leading stakeholder in Q1.
Overall MDLZ ranks 7th on our list of the best FMCG stocks to buy. You can visit 14 Best FMCG Stocks To Buy Now to see the other FMCG stocks that are on hedge funds’ radar. While we acknowledge the potential of MDLZ as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MDLZ 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.