What matters to todays consumer: 2024 consumer behavior tracker for the consumer product and retail industries Research & insight
Kraft Heinz is an attractive opportunity for a patient investor, with shares currently trading 36% below our $50 fair value estimate. With its past focus on bolstering profitability, the firm has impaired its brand intangible assets (both its retail relationships and brand mix) and suffered from lackluster sales. However, we believe new CEO Miguel Patricio is looking to author a new chapter. His experience suggests he understands the need for consumer-valued brand spending. We also see opportunity to remove inefficiencies, which should allow the firm to reinvest in its brands with only a modest erosion in profitability. The consumer defensive sector has lagged market performance this quarter through Dec. 5, returning 3.8% compared with the market's returns of 9.0% (Exhibit 1).
FTXG makes an effort to match the price and yield performance of the Nasdaq US Smart Food & Beverage Index. It usually invests a minimum of 90% of its assets in the common stocks and depository receipts of companies’ part of the underlying index. PBJ tracks the investment results of the Dynamic Food & Beverage IntellidexSM Index, which includes U.S. food and beverage companies. The fund normally invests at least 90% of its assets in the securities included in the underlying index. It has $86.30 million in assets, while its net expense ratio is 0.63%. Its top three holdings are Keurig Dr Pepper, Kraft Heinz and Mondelez International.
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Because healthcare is a necessity and medicine and medical equipment are always in demand, this sector offers strong defensive investment opportunities. Another advantage of defensive stocks’ low volatility is predictability. The return on defensive stocks is usually slow and steady, as are dividends if the company pays them, which can make it easier to predict how your investments will grow over time. That might be appealing if you’re working toward a specific financial goal or planning for retirement. Investing in defensive stocks may lower your overall risk as part of a diversified portfolio.
- This sector primarily includes companies dealing with household goods, food, beverages, hygiene products and other items.
- They also pay dividends, which can have the effect of cushioning a stock's price during a market decline.
- PSCC tracks the investment performance of the S&P SmallCap 600® Capped Consumer Staples Index.
- A growing economy—expansion to peak—is usually characterized by stronger earnings for businesses and consumers.
- Defensive stocks are those that tend to provide stable earnings and consistent returns, even during an economic downturn.
While it's never possible to perfectly predict what will shine when, there are often patterns that can give investors clues. In the current environment—with corporate earnings strength eroding, and worries growing over the market and economy—investors might want to take a closer look at stocks in defensive sectors. While no stock is completely immune to market volatility, consumer staples stocks tend to decline much less during corrections. At this time of writing, the broad-based S&P 500 index has slipped nearly 7% in the year to date, but the S&P 500 consumer staples sector is only down 4% for the same period.
In contrast, the S&P 500 information technology sector has dropped 13%. This has prompted some investors to consider defensive stocks as a cushion for their portfolios. We think investors should give wide-moat Anheuser-Busch InBev a look, trading more than 30% below our assessment of intrinsic value.
Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. You can also learn more about sector investing and read more recent market insights and commentary from Fidelity's portfolio managers. As such, they may not appeal to investors who seek rapid growth, or who are willing to take on a higher https://forex-review.net/ degree of risk for higher potential returns. IYK tracks the performance of the Dow Jones U.S. Consumer Goods Index, and invests at least 90% of its assets in the securities that are part of this index. It has $691.74 million in assets, while its net expense ratio is 0.43%. For the consumer discretionary sector, State Street Global Advisors (SSGA) offers one of the market’s top options.
Invesco DWA Consumer Staples Mom ETF (PSL, 55%)
Like most other Canadian banks, TD survived the great recession without major losses. It has also proven its mettle and stability during several other financial downturns that rocked the TSX as a whole. No matter what the economy is like, people do whatever they can to have a roof over their head, and that’s where an apartment-focused REIT win. It’s one of the largest companies in the country by market capitalization and has an impressively global reach. The railway giant in the country is in the integrated transportation and logistic business.
Thus, this yield-based forecast for CONDEF dogs was graded by Wall St. Wizards as 20% accurate. Fiat Chrysler Automobiles (FCAU) was projected to net $859.93, based on the median of target estimates from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk 90% more than the market as a whole.
What Are Defensive Stocks?
Companies without strong brand loyalty are susceptible to consumers switching brands, a trend that intensified during the pandemic. Many dividend aristocrats – companies that have increased their dividends each year for at least 25 consecutive years – are part of the consumer staples sector. Their non-cyclical nature means that no matter where we are in the economic cycle, the average consumer will still buy necessary consumer staples products in more or less the same quantities – regardless of their price. PSL tries to match the investment performance of the Dorsey Wright® Consumer Staples Technical Leaders Index. It invests a minimum of 90% of its assets in the securities included in the underlying index. It has $111.68 million in assets, while its net expense ratio is 0.60%.
Additionally, you can purchase an exchange-traded fund that follows the sector, such as the Consumer Discretionary Select Sector SPDR® Fund. The demand for consumer discretionary stocks normally increases or decreases as the economy grows or weakens. And since consumers typically purchase non-essential goods when they have discretionary income, anything else that threatens that income, such as lower wages or increasing prices, may also affect stock values. Archer-Daniels-Midland Co. (ADM) was forecast to net $297.51, based on target price estimates from fourteen analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 4% less than the market as a whole. Big Lots Inc. (BIG) was projected to net $382.10, based on the median of target estimates from eleven analysts, plus dividends, less broker fees.
"The sector's valuation, relative to its long-term average, came into the year very attractive," he says. With earnings growth for the broad market declining, growth expectations for utilities may look increasingly attractive. "Earnings growth expectations for the sector are currently around 7% to 8%, which is kind of what investors are hoping for with the market," says Simmons.
With full 5G penetration still years away, BCE has a lot of scopes to grow yet. Telecom is one of the few Canadian sectors there are well-established oligopolies. BCE is typically the largest giant (in terms of market cap) with an incredible presence. The company is rapidly reducing its carbon footprint, so it’s future-proofing its earnings as well.
Iconic Brands and Constant Cash Flows
When an economy is growing, it is usually expected that consumers will have more disposable income to spend on discretionary items. The average net gain in dividend and price was estimated at 77.4% on $5k invested as $1k in each of these five CONCY stocks. This gain estimate was subject to average volatility 63% above the market as a whole. Trading at roughly a 40% discount to our fair value estimate, Tyson’s shares are on sale while offering a 4% dividend yield. Despite inflationary headwinds and challenges in the beef and pork segments, we don’t see any structural changes to meat markets that warrant a permanent change to profitability. We remain optimistic about a return to mid-to-high-single-digit adjusted operating margins, driven by easing input cost inflation and supply-demand rebalancing.
Consumer staples: Strength among beverage companies
These two are not typical picks for defensive stocks, but rather they can provide some diversification from the overall market when it is fluctuating. However, more investors are attracted by its powerful growth potential, which is uncharacteristically high for a stock that checks so many defensive stock boxes. Even if you are completely untrusting of the market and stocks, defensive stocks can provide a good alternative to holding cash or bonds. On the flip side, the generally slow growth of defensive stocks often leads to smaller gains during a bull market. When other stocks are soaring, defensive stocks are more likely to perform below the market. Looking further down the consumer defensive space, a name like Unilever is also a name that we think is particularly attractive in this environment.
Within the sector, we consider retail defensive overvalued, trading at a 20% premium to our assessment of intrinsic value. However, we see opportunities in tobacco and alcoholic beverages, which in the aggregate trade 14% and 10%, respectively, below our valuations. We believe Estee Lauder’s shares are attractive, trading at around a 30% discount to our $200 fair value estimate. Although a slow travel retail recovery in China has impaired demand and margins, we remain constructive on the firm’s long-term prospects. Further, we believe it is poised to benefit from secular premiumization trends across developed and emerging markets. CPG manufacturers are also keen to appeal to a value-conscious consumer.