Based on the latest with the stock market (and the overall economy), sticking with defensive plays, like consumer stocks to buy and hold, continues to be one of the best moves you can make.
This month, the Federal Reserve has once again raised interest rates, by another 75 basis points (or 0.75%), in its efforts to bring down inflation. Although there are hopes that further increases (if any) will be more gradual, as market commentators have opined, it may take the U.S. officially entering a recession for the Fed to take its foot off the gas.
As rates keep climbing, growth stocks especially will remain under pressure. Furthermore, even if an official recession marks the end of the central bank’s rate hike activities, the prospect of the current economic slowdown getting worse from here is something else that could affect the performance of stocks overall, hitting more speculative growth-oriented stocks the hardest.
Besides providing a possible “safe harbor” in the near-term, at today’s prices many consumer stocks to buy and hold make for great long-term opportunities as well. That’s the case here with these seven, each of which earns either an “A” or “B” in Portfolio Grader.
Adecoagro SA (AGRO)
Adecoagro SA (NYSE:AGRO) is a bit of an “under-the-radar” play. With its corporate headquarters in Luxembourg, this international agribusiness operates entirely in Latin America, where it owns 27 industrial-sized farms in Argentina, Brazil and Uruguay.
However, for those in the know, AGROhas been one of the best consumer stocks to buy and hold throughout 2022. Shares are up around 10% year-to-date, even after pulling back last summer. The pullback followed the stock’s big run-up on the heels of Russia’s invasion of Ukraine, which caused a big jump in grain and oilseed prices due to shortages.
Yes, investors today are skeptical whether the boom times for food producers will continue. However, trading for just 5.3 times earnings, it could see a massive re-rating if the food shortage persists and outweighs the impact of a recession on food demand/prices. This B-rated stock also has a 3.77% forward dividend yield.
Campbell Soup (CPB)
With few market participants unaware of Campbell Soup’s (NYSE:CPB) “safe harbor” bona fides, it’s no surprise shares have performed well throughout the year. Since January, the packaged food products stocks have jumped by double-digits, all while markets overall have declined by double-digits.
Even so, it’s not as if the moment to add CPB stock to your portfolio at a good price has come and gone. While it may not have much more room to expand its current earnings multiple of 20.3, its 2.91% dividend yield could provide steady gains in the near-term, if markets remain volatile.
In the long-term, this once growth-challenged company can continue to make more progress re-accelerating top and bottom-line growth. Campbell Soup is achieving this, through a game plan focused on both product innovation and cost management. Earnings growth stemming from its current initiatives may send B-rated CPB gradually higher in the coming years.
General Mills (GIS)
General Mills (NYSE:GIS) is another packaged food stock that has performed well during this down year for the market. In fact, GIS shares have performed very well, jumping around 17.5% higher since January.
Even so, GIS stock (which earns an A in Portfolio Grader) trades for only 16.6 times earnings, making it arguably undervalued compared to other top consumer stocks to buy and hold.
Shares also currently sport a forward dividend yield of 2.73%. Both these factors, plus the company’s recession-resistant business, stands to keep GIS either steady or enable the stock to inch higher from here in the short term.
As for long term upside, this maker of brands such as Cheerios and Yoplait will likely continue to move up higher, in tandem with earnings growth. As evidenced by General Mills’ earnings beats in recent quarters, despite challenges like inflation, mid-to-high single-digit earnings growth is likely achievable.
Hershey Company (HSY)
So far this month, it seems that investors have decided to take profits with Hershey Company (NYSE:HSY). Not even yet another strong earnings report on Nov. 4 was enough to get this confectionary and snack foods stock back on an upward trajectory.
I can see why some existing holders of HSY stock are deciding to sell. Trading for a fairly-steep 29.2 times earnings, Hershey likely needs to continue “crushing it” performance-wise for this consumer stock to keep moving higher.
But it’s not as if building on its recent success is a tall order. Hershey’s purchase of Dot’s Pretzels will help this established company continue to report above-average organic growth.
The strength of its brands will enable the company to continue to raise prices to keep up with inflation. Both these factors could keep HSY stock, which earns an “A” rating in Portfolio Grader, a winner.
Coca-Cola Company (KO)
Over the past few weeks, the market has warmed back up to Coca-Cola (NYSE:KO). As you may recall, investors cooled on the soft drink maker’s shares during September and at the start of October.
Concerns about this venerable blue-chip’s valuation, plus worries about underwhelming growth, pushed KO stock back near its 52-week low. After reporting better-than-expected organic growth in its latest earnings release on Oct. 25, the aforementioned concerns have begun to ease.
Growing sales by 10% year over year, Coca-Cola reported organic revenue growth of 16% compared to the prior year’s quarter.
Coca-Cola also reported solid earnings per share (or EPS) growth of 7%. If the company can continue to report similarly-strong results in the quarters ahead, KO stock (B-rated in Portfolio Grader) could fully get out of its recent slump. This, plus further growth of its 2.97% dividend, may result in solid long-term returns.
Grocery store operator Kroger (NYSE:KR) shares have floundered after a big rally earlier this year, yet KR still is one of the best consumer stocks out there.
This holds true, whether we’re talking about the near-term or the long-term.
The company has been successful at overcoming challenges. After its strong earnings report last quarter, Kroger raised its guidance for the rest of the year. If this trend continues in the quarters ahead, KR stock could stay in the green.
Over a longer timeframe, if Kroger’s recently-announced merger with Albertsons Companies (NYSE:ACI) overcomes regulatory scrutiny and controversy and closes, this transaction could create substantial value for shareholders.
Along with a high potential for cost savings (much of which will fall to the bottom line for this B-rated stock), the merger may help the food retailer to overcome rising competition from e-commerce and big-box rivals.
Much like its “cola war” rival Coca-Cola, PepsiCo (NASDAQ:PEP) has also pleasantly surprised Wall Street with better-than-expected fiscal results.
On Oct. 12, the soft drink and snack foods company reported strong revenue (8.8% YoY), and earnings per share (22%) growth.
This has enabled PEP stock to get out of its own recent slump, putting the stock back in the green for 2022. Again, like its main competitor, you may have concerns about PEP’s valuation, in light of rising interest rates. PepsiCo currently trades for around 25.6 times earnings.
However, based on forecasts calling for steady earnings growth over the next two years, shares can sustain this multiple. PEP stock (which earns a “B” rating in Portfolio Grader) could keep climbing in line with earnings growth. This, plus its 2.57% dividend (which has been raised 49 years in a row), points to solid gains ahead.
On the date of publication, Louis Navellier has positions in KR and PEP. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.