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 The Procter & Gamble Company (NYSE:PG) 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 happy couple viewing the products of this household and personal product company in a mass merchandiser store.
The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 69
The Procter & Gamble Company (NYSE:PG), headquartered in Cincinnati, Ohio, is a renowned global consumer goods corporation. Founded in 1837 by William Procter and James Gamble, the company boasts an extensive portfolio of branded consumer packaged goods, distributed worldwide across various segments, including Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care.
Earlier this April, The Procter & Gamble Company (NYSE:PG) reported its fiscal Q3 results, with adjusted EPS of $1.52, surpassing estimates by $0.11. Revenue for the quarter rose 0.6% year-over-year to $20.2 billion, but fell short of estimates by $240 million.
On April 28, Argus updated its price target for The Procter & Gamble Company (NYSE:PG), raising it from $180 to $185 and maintaining a Buy rating. The firm emphasized the company’s potential for long-term earnings and share-price growth, driven by continuous product innovation, productivity enhancements, and improved advertising strategies. Innovations like Dawn Powerwash have been pivotal in capturing additional market share, allowing P&G to successfully implement price increases to offset inflationary pressures, even as some consumers switch to lower-priced store brands.
According to Insider Monkey’s database of 919 hedge funds, 69 reported owning stakes in Procter & Gamble Co. (NYSE:PG) as of the end of the March quarter. The largest stake during this period was held by Ken Fisher’s Fisher Asset Management, which owns a $2.7 billion stake in Procter & Gamble Co. (NYSE:PG).
Overall PG ranks 2nd 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 PG 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 PG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.