Will These Consumer Stocks Rebound Strongly In August?
Consumer stocks, which are known to be cyclical, have been hot in recent weeks. It is a well known fact that consumers tend to be lavish during good times and exercise more discretion during downturn. The U.S. entered a recession earlier this year, as the coronavirus pandemic shut down businesses nationally and globally. But this recession we face this round is not the same as the previous stock market crash. Instead of macroeconomic problems, we are in recession because of a global health crisis. Therefore, any ‘potential’ news regarding a vaccine discovery could shake up the market quite abruptly. There are hundreds of vaccine candidates currently in development, and six of them are in phase 3. This does not include the headline yesterday, which said that the first vaccine has been registered in Russia.
Markets react positively to the vaccine news. This is especially true among the epicenter stocks. Investors are reminded to practice caution when dealing with such headlines. It is often the case that people act instantly after reading a particular headline. And only to realize that the ‘newsworthy’ article actually doesn’t carry much weight. I don’t blame them though, I blame the social media. With a new wave of millennial traders, sometimes, just sometimes, fundamentals may not be the most important aspect when making investments.
Now, no one can be certain when the economy will actually reopen. If you are looking for a quick flip in these reopening stocks, then it might actually work. But momentum and recent news are your chips to play the trading game during this uncertain time. Alternatively, investors are also curious to know which consumer stocks are worth buying for the long run. That said, could these top consumer stocks be worth buying now?
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Top Consumer Stocks To Buy Now [Or Sell]: Domino’s
Consumers not only love the taste of Domino’s Pizza (DPZ Stock Report), they also like to invest in DPZ stocks. If you are an early investor in DPZ stock, this would be a twenty-bagger stock. Markets love to compare Domino’s and Chipotle (CMG Stock Report). Maybe that’s because both companies performed well during the pandemic. That suggests the attractiveness in these two stocks. For this reason, these two are undoubtedly the best consumer stocks to buy now or even after the pandemic. But the question is, which of these two offers a better value deal from an investors perspective? Judging from the PE ratio of 127 from Chipotle’s and 34 from Domino’s, we have a clear winner.
CEO Richard Allen told analysts last month: “I am if anything more enthusiastic about fortressing given what we’ve seen during the pandemic and the increased sales and momentum that we’ve had there around our delivery business.”
While a PE ratio in the 30s doesn’t look cheap by any means, don’t worry. The market has placed a premium because Domino’s is well suited for this environment. After all, pizza delivery has been around well before the delivery of some other types of food. Analysts believe the company can grow earnings at 15% annually in the coming years. With its strong operational skills, DPZ stock is likely to be a steady performer going forward.
Top Consumer Stocks To Buy Now [Or Sell]: Procter & Gamble (P&G)
Procter & Gamble (PG Stock Report) is not only the best consumer stock to watch. But more importantly, it is a recession-proof stock. In fact, it is a staple company that produces goods most people deem necessary. Apart from growth in PG stock, if you are an income hungry investor, PG stock is also one of the best investments you can find in the market. Its stability in revenue and dividend yield in the past six decades make it one of the best consumer stocks to buy with or without the pandemic.
While staple products generally are in constant need, the increased demand for cleaning, health and hygiene products are giving another boost to the company’s sales. It is also worth noting that its market in emerging countries only consists of 25% of the company’s total sales. This suggests that there’s plenty of room for growth in the coming years. In addition, it can raise its dividend consistently every year because the demand for its consumer staples stays steady throughout economic expansions and recessions.
For this reason, PG stock could deliver stable gains regardless of what’s happening in the broader market. That said, is PG stock the best consumer stock in the market? You tell me.