It’s wise to focus on defensive plays for your portfolio, like consumer stocks to buy and hold.
With the latest jobs report signaling the Federal Reserve will remain “full steam ahead” when it comes to raising interest rates, chances are the uncertainty and volatility that has rocked the stock market this year will continue in the near term.
Year-to-date, these types of stocks have outperformed the overall market. They’ve either experienced lower declines or in some cases have actually gone up in price since January. This outperformance could carry on in the near term.
That’s not to say that you should buy/hold consumer stocks today, and sell them when the bull market returns. These types of names can make for fantastic long-term core positions in your portfolio. Between steady dividends, and gradual appreciation, they can deliver solid total returns over a long timeframe.
With this in mind, now is a great time to add these seven consumer stocks to buy and hold to your portfolio. Each one earns either an “A” or “B” rating in Portfolio Grader.
General Mills (GIS)
Packaged foods giant General Mills (NYSE:GIS), which owns brands such as Cheerios and Yoplait, is a prime example of a consumer stock that has outperformed the overall market in 2022.
While major indices like the S&P 500 have fallen by double-digits, General Mills stock is up by double-digits, (12%) since January.
Yet while Investors have already bought into GIS stock as a “safe harbor,” don’t assume it’s now overvalued. Trading for 18.5 times this year’s estimated earnings, General Mills’ valuation is reasonable, reflective of its high-quality but not overly so.
In September, GIS reported earnings for its fiscal first quarter (ending Aug. 28, 2022). For the quarter, the company reported solid results, and raised its outlook for the full fiscal year. This stock (which earns an A in Portfolio Grader) is well-positioned to keep climbing higher. GIS also currently has a forward dividend yield of 2.87%.
Hormel Food (HRL)
Best known for making meat products like Spam, Hormel Foods (NYSE:HRL) makes a lot of other non-meat food products as well. These include Herdez salsa, Planters peanuts, and Skippy peanut butter.
Although HRL stock has experienced a slight price decline (9.34%), this pullback gives you the opportunity to buy what’s historically been a long-term winner. As InvestorPlace’s Will Ashworth recently discussed, Hormel has delivered an annualized total return of 13.4% over the past decade.
HRL’s history of dividend growth has played a big role in this. In the past five years, the company has increased its payout by an average of 9.37% per year.
Hormel currently pays investors $1.04 per share annually in dividends, which gives this stock a 2.33% yield. Coupled with earnings growth, which will drive more price appreciation, expect HRL (which earns an A in Portfolio Grader) to stay a winner.
Hershey Company (HSY)
Thanks to strong quarterly results, particularly impressive given inflationary headwinds, shares in Hershey Company (NYSE:HSY) have performed very well YTD, up just over 14%. The famed confectionary and snack foods company has been successful in overcoming inflationary and supply chain-related challenges.
HSY stock is another consumer stock that’s well positioned to continue performing well, as the strength of its brands (which besides its eponymous chocolate brand include brands like Kit Kat, Reese’s, and Twizzlers) enable the company to thrive in this challenging economic environment.
Along with continued strong results, which will pave the path toward a higher stock price, HSY stock (which currently earns a B rating in Portfolio Grader) is also emerging as a great dividend stock.
While Hershey’s current 1.88% dividend yield isn’t particularly high, assuming it continues raising its payout by a high single-digit amount annually, in time HSY could become a high-yielder.
Coca-Cola Company (KO)
Despite its status as a defensive stock, investors lately have soured on Coca-Cola Company (NYSE:KO). While holding steady for most of 2022, shares in the venerable soft drink and snack foods company have dipped from the mid-$60s to the mid-$50s per share.
Rising interest rates may be a factor. Many investors buy and hold KO stock primarily as an income play. With the Fed’s interest rates zooming from nearly zero during the pandemic, to 3.25% today, KO’s 3.23% dividend yield now appears to be far less impressive.
However, the market may be overestimating the impact of future rate hikes on Coca-Cola’s long-term appeal. Steady earnings growth will enable the company to continue raising its dividend.
In the long-term, with increased earnings, KO stock (which earns a B in Portfolio Grader) is also likely to keep rising in price. Coca-Cola remains a worthy portfolio holding.
Lifeway Foods (LWAY)
In contrast to the large-cap consumer stocks to buy and hold listed above, Lifeway Foods (NASDAQ:LWAY) is considerably smaller.
In fact, with a market cap of only $90.5 million, Lifeway is a micro-cap stock.
With its small size, there is ample opportunity for growth with LWAY stock. Lifeway’s sales growth has been strong, rising from $93.7 million in 2019, to $128.1 million over the past twelve months.
While sales growth may be decelerating today, analysts do expect the company to deliver around 10.2% revenue growth during 2023.
It’s also worth noting that LWAY stock (which earns an A in Portfolio Grader) could be a takeover target. As one online commentator argued earlier this year, a family feud may lead to a full sale of Lifeway.
Post Holdings (POST)
So far in 2022, shares in cereal maker Post Holdings (NYSE:POST) are up slightly (5.62%). This is likely due to the recession-resistant nature of its business.
It’s also helped that this company has improved its operating performance, despite inflationary pressures. Last quarter, for example, Post’s adjusted EBITDA went up by 8.1%, to $250.8 million.
You may at first be turned off by POST stock as a possible long-term investment opportunity. Namely, due to its high price-to-earnings (or P/E) ratio of 48.9. However, other details suggest there is room for this stock to move higher.
Analysts expected Posts’ earnings per share (or EPS) to increase next fiscal year (ending September 2023), from $1.68 to $3.26. POST (which earns a B in Portfolio Grader) could also receive a boost from management’s plans to buy back up to $300 million worth of shares.
Hostess Brands (TWNK)
Hostess Brands (NASDAQ:TWNK), makers of Twinkies and other snack food products, has performed extremely well during this year’s challenging market conditions.
The stock is up over 16% since January, and up just over 28% in the past year.
The outstanding performance of TWNK stock is not surprising. As I’ve pointed out previously, comfort foods are in hot demand during tough times such as now. That said, you may be concerned that Hostess Brands shares are running out of runway.
However, a look at recent results suggest otherwise. During the June quarter, Hostess reported a high level of revenue growth (16.8%).
Inflationary and supply chain pressures have hurt its margins, but as these issues ease, more of this growth could hit Hostess’ bottom line.
Earning a B rating in Portfolio Grader, TWNK stock currently trades for 24.5 times earnings, which is reasonable given its growth prospects.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.