7 Consumer Stocks to Buy and Hold Through the New Year

With the recent turbulence in the tech sector — with marquee operators like Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL) and Netflix (NASDAQ:NFLX) getting crushed — investors are looking for other places to put their money.

Even though the economy remains strong and it looks like there will be another robust holiday shopping season, there are still concerns that growth may have peaked.

In fact, there’s buzz that we may see a recession within the next couple years. The U.S.-China trade situation is far from resolved and the Federal Reserve is likely to continue to increase interest rates.

In this environment, it should be no surprise that consumer stocks are getting attention. Let’s face it, they are generally stable, have durable brands and usually sport attractive dividend yields.

There are also many interesting values in the category.

So then, what are the best consumer stocks to buy now? Well, let’s take a look at seven that stand out:

Coca-Cola (KO)

Over the years, Coca-Cola (NYSE:KO) has been transforming itself, as the company has been focused on innovating its product line.

One example of this is Coca-Cola Zero, which has been a nice growth driver. The drink has sweetners, such is aspartame and acesulfame, that make it taste like a regular coke.

But KO has also been getting aggressive with its M&A program. Some of the notable deals include the purchases of Organic & Raw Trading (the developer of the MOJO kombucha brand) and Tropico (the creator of various fruit-flavored beverages). Although, the acquisition that is likely to have the most impact is the $5.1 billion deal for Costa, a UK-based retail coffee chain.

KO also has a decent dividend yield, at 3.2%. And yes, the company has a reliable track record with the payout. Note that there have been increases for 55 consecutive years.

Starbucks (SBUX)

For the past few years, Starbucks (NASDAQ:SBUX) has been a rut, but it looks like things are getting back on track.

The latest earnings report certainly provided evidence of this. Consider that same-store sales growth came to 4% and global growth was at 3%.

Then again, SBUX has been working hard on improving the core business. For example, there has been a focus on the in-store experience. To this end, SBUX has made strides in bolstering the operational efficiencies.

Meanwhile, the company continues to push the envelope with innovation. At the heart of this is the digital payments platform, which has become critical for customer loyalty. According to eMarkter, SBUX has the most popular digital payments app, with 23.4 million users.

One concern is China, which has been slowing down. But SBUX is taking the long view and is not letting up on the investment in the country. After all, it represents a massive opportunity as the middle class is likely to continue to grow for many years to come.

Consumer Stocks: Walt Disney (DIS)

Walt Disney (NYSE:DIS) does have its issues. A big chunk of revenues still comes from its broadcast and cable assets, which have been adversely impacted by trends like cord cutting.

Yet CEO Bob Iger has been adept at finding ways to deal with the problems. Yes, it’s about doubling down on streaming.

Keep in mind that the ESPN+ service has had a strong start, snagging over one million subscribers in the past six months. But of course, there is also the Disney+ entertainment offering that is expected to launch next year. It will have access to valuable content from properties like Lucasfilm, Marvel, Pixar and Disney Animation. But DIS is also in the process of acquiring parts of Twenty-First Century Fox (NASDAQ:FOXA) for $71.3 billion. The deal will bring along other franchises like “Avatar” and “X-Men.”

But streaming will not just be about having a recurring revenue stream. DIS will also benefit from having data on its users, which will help improve content. What’s more, there should be synergies with other businesses, like consumer products.

Consumer Stocks: Procter & Gamble (PG)

Last year, activist investor Trian Fund Management launched a proxy fight against Procter & Gamble (NYSE:PG) and its co-founder, Nelson Peltz, took a board seat. When it comes to consumer companies, he has a great track record.

A big part of the strategy is to reduce the bureaucracy in the organization. This will involve reducing the number of business units from ten to six. There will also be more decentralized decision making.

But even before Trian made its moves, PG was already making some important changes, such as layoffs and the unloading of various divisions. And for the most part, they have been paying off. During the latest quarter, organic sales grew by 4% (this was the highest in five years). Even the beleaguered Gillette business was able to show strength.

Finally, PG has a dividend yield of 3.1%. In fact, the company has increased the payment for over 60 consecutive years.

Consumer Stocks: Electronic Arts (EA)

It has been an awful year for Electronic Arts (NASDAQ:EA). Since July, the shares have plunged from $149 to $84.

Granted, EA has its problems. The latest earnings report was far from inspiring. There are also worries about the impact of Epic Games’ Fortnite, which has sent shock waves across the gaming industry.

Yet I think the selling on EA stock has been overdone.

First of all, EA has platform that spans PCs, consoles and mobile, with major franchises like FIFA, Madden, NBA Live, NHL, PGA and UFC. The company is also nicely positioned for the eSports market that is expected to see long-term growth. Oh, and EA has launched a subscription service, which should provide a stream of recurring revenues and allow for the monetization of older titles.

Something else: Wall Street analysts are still fairly bullish on EA stock. Consider that the average price target is $125, which assumes 47% upside from current levels.

Consumer Stocks: Hanesbrands (HBI)

Based on the performance of Hanesbrands (NYSE:HBI), it seems like underwear is going out of style! For the year so far, the shares are off by about 24%.

It’s true that HBI’s business has been somewhat lackluster. Just take a look at the latest earnings report. The company not only had a disappointing quarter, but the projection was not too hot either.

But this could be an opportunity, especially for value investors. The fact is that HBI has a relatively steady business and a strong set of brands, including Playtext, Maidenform and Abanderado.

As for the valuation, it really is at rock-bottom levels, with the forward price-to-earnings ratio at about 9X. HBI also has an attractive dividend yield of nearly 4%.

Consumer Stocks: H&R Block (HRB)

With tax reform, the preparation process should be somewhat easier. A key is that the standard deduction has been doubled.

But this does not necessarily mean that tax prep firms will see a reduction in business. If anything, because of the changes to the tax code, there may be even more people who seek assistance.

This should benefit H&R Block (NYSE:HRB), which has a massive retail and digital footprint. The company, which has 9,981 offices across the U.S., prepared 23.3 million returns last year. H&R Block also provides a variety of add-on offerings like advance loans on refunds, debit cards and tax identity protection services.

As for HRB stock, the valuation is certainly at low levels. Consider that the price-to-earnings ratio is about 10X. The dividend yield in this consumer stock is also 3.5%.

— Tom Taulli

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Source: Investor Place