Consumer goods stocks are probably some of the most vulnerable stocks to the cyclical fluctuations in the economy. With the recent volatility of the markets, many investors have abandoned most consumer goods stocks, even low cost retailers like Wal-Mart (NYSE:WMT) have seen their trading volume go down. But, if you step away from the entire consumer goods sector, you could be missing out on some really great stocks. Here is a list of four consumer goods stocks that have market caps over $20B and forward P/Es under 14.
British American Tobacco (NYSEMKT:BTI) is a worldwide tobacco company that sells cigarettes, cigars and other tobacco products. Its brands include the Dunhill, Kent, Lucky Strike, Pall Mall, Vogue, Viceroy, Kool, Rothmans, Peter Stuyvesant, Benson & Hedges, and State Express 555 brand names. As of open on December 13, BTI was trading at $94.10 with a one-year estimate of $103.50. In addition to its upside, BTI also pays a $2.37 dividend (2.50% dividend yield). Right now, BTI is priced at 13.67 times its forward earnings.
If you have doubts about investing in a tobacco company with so many people quitting tobacco use, consider this – BTI’s earnings have grown 10.82% per annum over the last five years, and are forecast to grow by nearly 12% per annum over the next five years. BTI trades at a lower PE ratio than domestic tobacco stocks like Altria (NYSE:MO) and Reynolds American (NYSE:RAI). BTI is also expected to grow its earnings at a faster rate. Another tobacco stock with similar characteristics is Philip Morris (NYSE:PM). We both like BTI and PM.
Honda Motor Company (NYSE:HMC): In addition to its popular line of automobiles, HMC also makes motorcycles, all-terrain vehicles, watercraft, lawn mowers, power sprayers and more. Basically, if it has a motor in it, HMC probably makes a version of it. As of open on December 13, HMC was trading at $30.95 with a one-year estimate of $41.54. In addition to its upside, HMC also pays a 70 cents dividend (2.20% dividend yield). Right now, HMC is priced at 8.66 times its forward earnings. HMC has had a hard time of things over the last five years; its earnings have shrunk 28.51%. Analysts predict its earnings will level off over the next five years, losing less than 1% per annum for the next five years.
It may not sound that promising, but HMC has returned 8.52% since the start of the fourth quarter. An alternative to HMC is General Motors (NYSE:GM). GM is trading near its 52-week low, but hedge funds are bullish on it. Hedge fund rock star David Einhorn quadrupled his stake in GM over the third quarter. He had nearly $300 million invested in GM at the end of September.
Hitachi Ltd (HIT) makes and sells electronic and electrical products, including construction machinery, disk drives, flat panel televisions, mobile phones, and air conditioners, as well as automobile components, wires and cables. As of the open of trading on December 13, HIT was trading at $54.51 with a one-year estimate of $68.00 target estimate. In addition to its upside, HIT also pays a 67 cents dividend (1.20% dividend yield). Right now, it is priced at 8.27 times its forward earnings. Over the last five years, HIT’s earnings have grown by 24.21%. Going forward, analysts expect the company’s earnings will increase by just 4.80% per annum over the next five years, but its stock pricing is hopeful. The company’s share price has gone up 13.17% since the end of the third quarter. Ken Fisher’s Fisher Asset Management is fan of HIT. It had over $2 million in the company at the end of the third quarter.
Panasonic Corporation (PC) also makes electronic products. It specializes in video and audio equipment, personal electronics like digital cameras, mobile phones and car navigation systems, and home electronics like refrigerators, washing machines, vacuum cleaners, hair dryers, electric shavers and more. PC was trading at $8.92 a share when the markets opened on December 13, with a one-year target estimate of $13.46. PC pays a modest 13 cents dividend (1.40% dividend yield). Right now, it is priced at 13.24 times its forward earnings. Over the last five years, PC’s earnings fell 9.77% per annum, but hopes are high for the company going forward. Analysts expect the company‘s earnings will grow by 33.30% over the next five years, nearly double industry earnings growth expectations of 17.82%. Jim Simons’ Renaissance Technologies had more than $13 million in the company at the end of September.
Disclosure: I am long PM.