4 Consumer/Non-Cyclical Shinning Stars

Includes: AVP, KMB, PG, SPLS
by: Leonid Kanopka

Recently there have been stocks trading at or near their March 2009 lows. We all know what happened in March 2009, and the recent scare of another recession has pushed certain stocks back to the “dark days.” The markets have made a 70% turnaround, on average, since 2009, and I do not see why in the next few years these four stocks in the Consumer/Non-Cyclical sector won't do the same.

The recent “cyclical” bad news has pushed these stocks to new lows and opened the door to great opportunities. The combination of bad market sentiment, strong fundamental data, and a clear vision for growth is an extremely profitable scenario. Below are 4 value stocks that will rebound and outshine the sector:

Avon Products, Inc. (NYSE:AVP) creates, manufactures and markets beauty and non-beauty-related products. The Company's product categories are Beauty, Fashion and Home. The current market price is $16.31 with a one-year analyst price target of $22.38. This represents a 37.22% upside potential, not including its quarterly $0.23 dividend, which currently yields 5.55% yearly. I love the fact that this stock is trading at its 52-week low, while it continues to grow as a company. AVP's current trailing P/E of 9.8 represents a 51% discount to its Personal Products Industry average. Despite this discount in stock price, revenue is $11.42B compared to the industry average of only $812.40M. Another upside to Avon that sparked my interest was international sales, which have kept revenue expanding at an impressive pace. The Latin American market is particularly strong, especially in Brazil. Also, several new products as well as product extensions are always on hand as part of AVP’s continuous innovation initiative. Analysts believe this tradition and mindset gives AVP a competitive advantage over the competition. The only downside with Avon is the subsequent strengthening of the US dollar versus major currencies, such as the Euro, Pound, Mexican Peso, and Brazilian Real, will have a negative impact on the company’s top-line growth. Overall, this is a stock that is trading at its low and ready for a major comeback that will be propelled by its excellent dividend yield.

Kimberly-Clark Corporation (NYSE:KMB) is a global company focused on building its personal care, consumer tissue, K-C Professional and Other and health care brands. The company is principally engaged in the manufacturing and marketing of a range of products worldwide. The current market price is $68.61 with a one-year analyst price target of $73.85. This represents a 7.64%, but does not include the 4.03% yield from its $0.70 quarterly dividend. This stock is trading around its 52-week low, which shows me that certain factors have not been realized by the market. For one, KIMBERLY-CLARK's gross margin (trailing 4 quarters) of 28.0% is the highest within its Paper Products Industry. Also, another factor that caught my attention was KMB's attempt for a better capital investment opportunity, and plans to direct its excess cash flow toward increasing dividends and making share repurchases. Once this happens KMB will be a hard stock to ignore. KMB has outperformed the market for the past 26 years, and KMB has not yet tapped into its strong growth opportunities in developing and emerging markets. Kimberly-Clark has undertaken two main cost saving programs to reduce cost and improve margin. This mixed with continuous growth and increase in dividends makes this a crown jewel in the Consumer/Non-Cyclical sector.

Procter & Gamble Co (NYSE:PG) is focused on providing consumer packaged goods. The current market price is $61.14 with a one-year analyst price target of $71.63. This represents a 17.16% upside potential, not including its $0.53 quarterly dividend yielding 3.4%. There are several reasons this stock sticks out. PG has a strong track record with acquisitions, and despite a soft retail environment, recent volume growth has exceeded expectations. The stock is currently trading around its 52-week low. This is good for investors because PG has strong market share, a balanced portfolio of brands, and innovative premium-priced products in both mature and emerging markets. All of these upsides are not yet reflected in the market price, once they are, the market price, I feel, should be mid 80s. Procter & Gamble Co's gross margin (trailing 4 quarters) of 49.5% is the highest within its Household Products Industry. Despite its success, PG's trailing P/E of 16.1 represents an 8% Discount to its 5-year average of 17.4, and forward P/E of 14.7 represents a 10% discount to its 5-year average of 16.4. PG is a company with strong steady growth year after year, and at current levels leaves room for substantial growth.

Staples, Inc (NASDAQ:SPLS) is an office products company. As of January 29, 2011, Staples served customers of all sizes in 26 countries throughout North America, Europe, Australia, South America, and Asia. The current market price is $13.94, with a one-year analyst price target of $17.63. This represents a 26.47% upside potential not including its $0.10 quarterly dividend yielding 2.83%. Staples is trading near its March 2009 lows, yet its earnings continue to grow.

The enterprise value is $10.8B, compared to the underpriced market value of $9.74B. The company has earned $1.37 per share during the past four quarters, translating into a trailing P/E of about 10.16x, and is still on the rise. Despite its strong fundamentals Staples’ trailing P/E represents a 53% discount to its Specialty Retailers subsector average. Another reason Staples is on this list is because its International segment is generating positive returns and is expected to see continued improvement as the year progresses. This stock is a hidden gem this will definitely soar in the near future once the markets adjust.

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