10 Cash Rich, Profitable Firms In A Weak Consumer Environment

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Includes: BF.B, CCU, CPLA, DLTR, EDU, ENR, MNST, NUS, PBH, STZ
by: Follow My Alpha

While consumer spending remains restrained at the moment, that doesn’t mean it will be that way forever. The reality is people will always be spending in some form. In our view the world can't and won’t ever completely go cold turkey relative to being a consumer. That is why--even when investors are bearish on consumer consumption overall-- it still makes sense to review Consumer Defensive names that are cash rich and hold strong profit margins.

The Operating Profit Margin is a profitability ratio that measures the effectiveness of company operations. This ratio allows investors to see how much profit is left per dollar of sales after variable costs are deducted. In addition, it helps point out exactly which companies are deriving a decent margin in a tough consumer environment.

The Current ratio is a liquidity ratio that lets investors know whether a company can easily pay off all its short-term obligations through current assets. If this number is below 1 that generally indicates there could be some type of liquidity issue. While there may not be an impending issue with the company’s liquidity, it’s an easy to headache to avoid by merely focusing on companies that hold at a least a ratio of 1.

We first looked for companies that have posted strong operating margins over the last year (1-year fiscal operating margin>10%). From this narrowed list of companies we then screened for companies that had at least a current ratio of 2. We did not screen out any companies by market cap.

The list is ranked from highest to lowest by the operating profit margin:

1. Brown-Forman Corporation. (BF.B)

Sector

Consumer Defensive

Industry

Beverages - Wineries & Distilleries

Market Cap

$10,892M

Beta

0.76

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The company makes and sells a variety of alcoholic beverage brands. It has a operating profit margin of 33.06% and a Current ratio of 2.62. The short interest was 1.60% as of 09/30/2011.

2. Hansen Natural Corporation. (HANS)

Sector

Consumer Defensive

Industry

Beverages - Soft Drinks

Market Cap

$8,147M

Beta

0.40

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The company develops and sells a variety of alternative beverages ranging from natural sodas to fruit juices. It has an operating profit margin of 26.67% and a Current ratio of 6.51. The short interest was 1.70% as of 09/30/2011.

3. Prestige Brands Holdings Inc. (PBH)

Sector

Consumer Defensive

Industry

Household & Personal Products

Market Cap

$565M

Beta

1.47

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The company makes and sells personal care, over-the-counter healthcare, and household cleaning brands all over North America. It has an operating profit margin of 22.63% and PBH has a Current ratio of 2.05. The short interest was 4.60% as of 09/30/2011.

4. Capella Education Company. (CPLA)

Sector

Consumer Defensive

Industry

Education & Training Services

Market Cap

$476M

Beta

0.46

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The company is an online post-secondary education services company. It has a operating profit margin of 22.29%. CPLA has a Current ratio of 5.29. The short interest was N/A as of 09/30/2011.

5. United Breweries Company, Inc. (CCU)

Sector

Consumer Defensive

Industry

Beverages - Brewers

Market Cap

$3,538M

Beta

0.44

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The company sells a variety of beverages in Chile and Argentina. It has a operating profit margin of 18.52 %. CCU has a Current ratio of 2.12. The short interest was N/A as of 09/30/2011.

6. New Oriental Education & Techn. (EDU)

Sector

Consumer Defensive

Industry

Education & Training Services

Market Cap

$4,490M

Beta

0.83

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The company offers private educational services within China. It has a operating profit margin of 17.12%. EDU has a Current ratio of 2.70. The short interest was N/A as of 09/30/2011.

7. Energizer Holdings, Inc. (ENR)

Sector

Consumer Defensive

Industry

Household & Personal Products

Market Cap

$5,157M

Beta

1.52

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The Company is a manufacturer of primary batteries, flashlights and men's and women's wet-shave products. It has a operating profit margin of 16.36%. ENR has a Current ratio of 2.16. The short interest was 4.00% as of 09/30/2011.

8. Constellation Brands Inc. (STZ)

Sector

Consumer Defensive

Industry

Beverages - Wineries & Distilleries

Market Cap

$4,037M

Beta

1.06

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The company produces and distributes alcohol beverages. It has a operating profit margin of 15.08%. STZ has a Current ratio of 2.44. The short interest was 2.60% as of 09/30/2011.

9. Nu Skin Enterprises, Inc. (NUS)

Sector

Consumer Defensive

Industry

Household & Personal Products

Market Cap

$2,870M

Beta

1.24

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The company does direct sales through the world for personal care products and nutritional supplements. It has a operating profit margin of 14.12%. NUS has a Current ratio of 2.38. The short interest was 12.00% as of 09/30/2011.

10. Dollar Tree Stores, Inc. (DLTR)

Sector

Consumer Defensive

Industry

Discount Stores

Market Cap

$9,973M

Beta

0.17

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The company offers a variety of merchandise at the fixed price of $1.00. It has an operating profit margin of 10.71%. DLTR has a Current ratio of 2.84. The short interest was 5.70% as of 09/30/2011.

We hope this list helps as investors look at consumer defensive stocks with strong operating margins and a significant amount of liquidity on hand.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.