Each of the three major US stock market indices are experiencing a pullback. The current downturn in the market has been caused by a new record high in coronavirus cases, a delayed fiscal stimulus package, and uncertainty regarding the results of the presidential election.
Even though the US economy improved by 7.4% in the third quarter, it came after a 9% contraction during the second quarter. There is widespread fear among investors of a double-dip recession, which could hurt the markets after a short period of recovery.
Given these issues, it could be wise to invest in stocks that are essentially “recession-proof” because of the inelastic demand for their products. In this regard, the consumer goods market is expected to do well, regardless of an economic slowdown. The demand for consumer goods in the US increased by around 10% during the pandemic.
The Procter & Gamble Company (PG), The Unilever Group (UN), and Colgate-Palmolive Company (CL) are giants in the consumer goods space and all of them have reported a growth in sales in their last concluded quarters. These companies have a solid portfolio of products that are considered to be essential goods, and the demand for which is least likely to be affected by a slowdown. So, they could be safe options for your portfolio now.
The Procter & Gamble Company (PG)
PG manufactures and markets branded products in the consumer goods sector. The company has operations in grooming, healthcare, beauty, home care, and fabric care. PG’s stock has gained 9.8% so far this year.
The company’s Pampers Pure line of diapers for babies now comes with shea butter for better skin care. The company has also recently launched Oral-B iO which features a linear magnetic drive along with a redesigned brush head.
During the quarter that ended September 2020, the company’s net sales grew 9% compared to the same period last year. The company’s net earnings per share was $1.63, up 20% year-over-year.
PG is expected to witness revenue growth of 4.6% for the quarter ending December 2020, and 4.5% in 2021. The company’s EPS is estimated to grow 8.6% in 2021 and at a rate of 8.5% per annum over the next five years.
How does PG stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating
You can’t ask for better. The stock is also ranked #1 out of 34 stocks in the Consumer Goods industry.
The Unilever Group (UN)
UN manufactures and markets personal care products, food, refreshment, home care products, skincare and haircare products, cleaning products, and more. The company runs more than 400 brands including Axe, Knorr, and Lipton. UN’s stock has gained 32.1% since hitting its low in mid-March.
The company has announced its intention of moving towards greater sustainability by eliminating fossil fuel from its cleaning products by 2030. This move could further position the company as a market leader in space. The company has also been focusing on improving its e-commerce capabilities. Its e-commerce sales rose 76% during the third quarter compared to the same period last year.
For the quarter that ended September 2020, the company’s sales grew 4.4%, compared to the same period last year. The sales in emerging markets increased 5.3%, while developed markets saw an increase of 3.1%.
UN’s trailing-twelve-month EBITDA has seen a three-year CAGR of 4.95%. The company’s trailing-twelve-month operating income has witnessed a three-year CAGR of 5.72%.
It’s no surprise that UN is rated a “Buy” in our POWR Ratings system, with a grade of “A” in Industry Rank and a “B” in Trade Grade, Buy & Hold Grade, and Peer Grade. In the 34-stock Consumer Goods industry, it is ranked #4.
Colgate-Palmolive Company (CL)
CL manufactures and markets consumer products globally. The company primarily has operations in oral care and hygiene along with pet nutrition. CL’s stock has gained 14.6% so far this year.
The company has recently launched Hum, which is a smart electric toothbrush which helps users brush more effectively. CL has also been focusing its efforts on e-commerce to drive business during the pandemic.
For the quarter that ended September 2020, the company’s sales grew 5.5% compared to the same period last year. CL’s EPS for the quarter grew 21% year-over-year.
CL is expected to witness revenue growth of 1.5% for the quarter ending December 2020, and 2.7% in 2021. The company’s EPS is estimated to grow 6.4% in 2021 and at a rate of 5.8% per annum over the next five years.
It’s no surprise that CL is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. In the 34-stock Consumer Goods industry, it is ranked #2.
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PG shares were trading at $137.82 per share on Monday afternoon, up $0.72 (+0.53%). Year-to-date, PG has gained 13.07%, versus a 3.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More…
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