Proprietary Data Insights
Financial Pros Top Consumer Defensive Stock Searches This Month
Is The Consumer Starting To Crack?
The personal savings rate – that is savings as % of disposable income – dropped to 6.2% in March, down from that insane pandemic high of 33.8% and the pre-pandemic 7.5% average.
You’re saving less because everything costs more, you’re getting out more, or both.
It’s probably a classic tale of the haves and have nots.
If you’re comfortable and absorb inflation as a rounding error, chances are you’re able to save at a higher rate than the average. However, if you’re one of the 58% who says inflation is hurting your confidence, the following data might apply:
Source: New York Life
Is A Debt Bubble About To Burst?
The Juice has our eye on this question.
On May 9th, we reported and tried to make sense of the startling news:
Revolving debt (that’s credit cards) surged by $35.3 billion in March. That’s a 21.4% annual increase and blows away the $16.2 billion monthly increase we saw in February.
Pent-up, post-lockdown spending? People using credit cards to pay for life’s basic necessities? Probably a mix of both.
Prior to that, on April 19th, we culled together a nugget from the big four banks’ respective earnings reports:
In their respective Q1s, Citigroup (C), JPMorgan Chase (JPM), Wells Fargo (WFC), and Bank of America (BAC) reported 23%, 29%, 33%, and 25% increases in consumer credit card spending.
At all four banks, debtors have started to make slower payments. In other words, they’re carrying balances, however, for the most part, charge offs have yet to appear worrisome.
Now there’s word that 60-day delinquencies on subprime credit card and personal loan debt have risen for eight consecutive months and at a faster pace than normal.
Take all of this data together alongside broad economic conditions and it’s clear the writing’s on the wall.
Like we said, just wait.
Things might get uglier. However, one thing’s certain. Scroll with us.
The Only Certainty In An Uncertain World
That chart shows global U.S. toothpaste sales in 2021.
There’s a reason why the leader, Procter & Gamble (PG), shows up as the top consumer defensive stock financial pros are searching for, via our proprietary Trackstar database.
It’s because the company continues to grow in an environment where some consumers only have cash to spare on the necessities. The necessities P&G sells across categories.
As for the stock, it has performed relatively well against the broad market and big tech names, such as Apple (AAPL).
Source: Google Finance
Because Everybody Needs Toothpaste
CFO Andre Schulten summed up P&G’s strategy nicely on the company’s recent earnings call:
… we prepare on multiple fronts. I think the first level of protection here is the portfolio we’ve chosen to play in. We’ve moved out of discretionary categories into categories that are daily use, health- and hygiene-focused…
We have intentionally built price levels in every brand and across brands to ensure that we have offerings for consumers. If they feel they are budget constrained, they can trade within the P&G brand offerings.
It’s the truth.
A quick stroll down the toothpaste aisle, for example, shows that, yes, you can find P&G brands at various price points. If we can state anything as fact, it’s that people pretty much have to buy toothpaste and other day-to-day consumer staples, particularly in the personal hygiene category.
A Defensive Investment That Pays?
For a review of dividend aristocrats, see The Juice from April 13th.
PG sits at the top of this esteemed list, having increased its dividend every year for the last 65 years.
If you’re one of the lucky consumers with cash to spare in this environment and you’re looking for opportunity in the stock market, PG might make sense. Particularly if you’re seeking an investment that generates consistent income and makes sleep something closer to a certainty during these uncertain times.
The Bottom Line: In an economic environment that’s mostly negative, it’s tough to know exactly what to believe and how to react as an investor.
Inflation is hitting large swaths of the population hard, turning the screws on personal budgets. For this segment, the writing is on the wall with respect to debt, savings, and other personal financial metrics. However, one thing’s for sure – some of the money this subset spends ends up on Procter & Gamble’s top line.
PG stock has all the makings of a solid defensive play for long-term investors looking for relative stability as they doom scroll the latest stock market and broad economic headlines.
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