We recently published a list of 8 Best Consumer Staples Stocks To Buy Right Now. In this article, we are going to take a look at where The Procter & Gamble Company (NYSE:PG) stands against other best consumer staples stocks to buy right now.
Consumer spending plays a significant role in the economy, according to the U.S. Bureau of Economic Analysis, in Q2, personal consumption expenditures represented nearly 68% of the US national GDP. As a result, economic growth and decline is often led by consumer spending. However, spending on consumer staples goods tends to be less cyclical due to the low price elasticity of demand and the demand for these goods remains relatively constant regardless of the state of the economy or the cost of the product.
The consumer staples sector is comprised of companies that produce and sell essential goods such as food, beverages, household products, and personal care items. This sector is further divided into six industries: beverages, food and staples retailing, food products, household products, personal products, and tobacco.
Despite challenges, the consumer staples sector has consistently outperformed other sectors, making it a popular choice for defensive investment strategies. The sector’s low volatility and consistent revenues also make it an attractive option for investors seeking steady growth and solid dividends.
A Safe Haven in a Volatile Market
Bryan Spillane, Managing Director of Equity Research at Bank of America Securities, in an interview with CNBC on September 20, discussed the performance of consumer staples stocks during periods of rate cuts associated with a soft landing. He noted that historically, these stocks tend to perform well in such environments, with some names consistently outperforming others.
Spillane explained that his analysis showed that certain companies have a history of outperforming their peers during periods of rate cuts. He attributed this to their high-quality business models and stable dividend payments, which make them attractive to investors seeking yield in a low-rate environment.
When asked about the current market environment, Spillane noted that the dynamics within consumer staples are complex, with factors such as price adjustments and disinflation affecting the sector. However, he believed that with interest rates coming down and consumers having more purchasing power, the sector should benefit. He specifically pointed to the discretionary impulse channels, such as convenience stores and gas stations, where companies have struggled with declining traffic. Spillane also highlighted the attractiveness of consumer staples stocks due to their dividend yields, which are historically in the 3% to 4% range. He noted that some names have even higher yields due to depressed valuations.
The consumer staples sector is an attractive option for investors seeking a defensive strategy. The sector has consistently demonstrated resilience and outperformance in various market environments. As interest rates come down and consumers regain purchasing power, the sector is poised to benefit significantly.
Our Methodology
To compile our list of the 8 best consumer staples stocks to buy right now, we used the Finviz and Yahoo stock screeners to find the largest consumer staples companies. We then narrowed our choices to 8 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and 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 Investors: 64
The Procter & Gamble Company (NYSE:PG) is one of the world’s largest and most well-known consumer goods companies, with a portfolio that includes iconic brands such as Tide, Pampers, and Gillette. The Procter & Gamble Company (NYSE:PG) operates in multiple sectors including beauty, health, fabric, and home care. The Procter & Gamble Company (NYSE:PG) is known for its innovative products and invests heavily in research and development.
For the quarter that ended September 30, The Procter & Gamble Company’s (NYSE:PG) organic sales increased by 2%, compared against a strong base period of 7% growth. Notably, eight out of ten product categories either grew or maintained their organic sales during this period, reflecting solid market performance. In terms of regional growth, focus markets saw a 2% increase, with North America leading the way at 4% and Europe’s markets rising by 3%. Enterprise markets also contributed, posting a 1% growth for the quarter. Additionally, 28 of the top 50 category/country combinations either held or expanded their market share. The company’s Core earnings per share (EPS) experienced a 5% increase compared to the previous year, and on a currency-neutral basis, core EPS grew by 4%. The company’s adjusted free cash flow productivity stood at a robust 82%.
Looking ahead, The Procter & Gamble Company (NYSE:PG) reaffirmed its guidance for fiscal 2025, projecting all-in sales growth between 2% and 4% compared to the previous year. The company also maintained its outlook for organic sales growth, anticipating an increase in the range of 3% to 5%.
The Procter & Gamble Company (NYSE:PG) expects diluted net earnings per share (EPS) growth to be between 10% and 12%, compared to fiscal 2024’s diluted net EPS of $6.02. Additionally, the company continues to forecast core EPS growth of 5% to 7%, based on fiscal 2024’s core EPS of $6.59. The Procter & Gamble Company’s (NYSE:PG) consistent earnings and strong dividend outlook make it a compelling investment opportunity for long-term and income-focused investors.
Overall, PG ranks 6th on our list of best consumer staples stocks to buy right now. While we acknowledge the potential of PG to grow, our conviction lies in the belief that 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.
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Disclosure: None. This article is originally published at Insider Monkey.