What are consumer stocks?
Consumer stocks are typically a sector of stocks that include companies that produce consumer staples. Every individual/consumer relies on consumer staples on a daily basis. These would include products like beverages, food, cleaning products, personal hygiene products, and household products like cosmetics, paper goods, tobacco, and alcohol. These goods are purchased irrespective of the economic condition of the nation, as they are considered to be essential items.
However, it is important to remember that consumer stocks are widely different from consumer discretionary stocks. The latter includes hotels, restaurants, and apparels. While these businesses cater to consumers, they do not provide essential goods. They instead offer services to the needs of consumers rather than their wants.
Benefits of consumer stocks
One of the main concerns when it comes to investing in stocks is the toll it takes during times of economic distress and recessions. However, when it comes to consumer stocks, they are non cyclical. In simple terms, they offer a safety net to investors as essentials never go out of need. In fact, the demand for them rises during times of recessions. In addition, due to the large demand by consumers, these companies generate consistent profits even during times of a weak economy.
These consumer stocks also pay dividends and are defensive proving to outperform other stocks even during a bear market. This can be mainly attributed to the essential nature of consumer stocks. For instance, several consumer stocks thrive during times of pandemics and recessions as consumers tend to stock up on essentials. This further increases the valuation of companies producing consumer products and promises investors a solid return. The most attractive factor of consumer stocks is their stable revenue during different economic cycles and challenges.
Top consumer stocks to look out for in 2021
Here is a loss of consumer stocks that have performed well and can be potentially great investments for this year.
Hindustan Unilever Limited
HUL is currently considered to be the leader in the consumer goods market with its great and consistent financial performance over the last few years. It also recorded a 52-week high of Rs. 2614.30 and the lowest being Rs. 1757.30. The market size of HUL is Rs, 5,08,113.69 Crores proving the company to be a great investment.
Nestle India Ltd.
Nestle bags the second position after HUL, being the Indian subsidiary of the Swiss-based MNC. It has a market capitalization of Rs. 1,59,155,52 Crores, 46% of which is generated from milk, 12% from beverages, 28% from dishes, and 13% from confectionary and chocolates. With a high at Rs. 18,369.95 and the lowest at Rs, 12,200.00 over a span of 52 weeks, Nestle can be a smart investment.
ITC is a well-reputed tobacco company in India that is diversified into sectors like FMCG, printing, paperboards, packaging, packaged goods, hotels, commodities, ghee, dairy, personal care products, luxury chocolates, frozen food products, and many more. The company provides a dividend yield of 4.33% and has a liquid and cash investment of Rs. 35,600 Crores. ITC draws nearly 62% of its revenue from the tobacco business with hotels providing the least of its revenue of about 3.28%.
Britannia is considered to be one of the oldest and the front leaders of the biscuit industries in India. Popularly referred to as the powerhouse of the consumer goods sector, it has about 21.7 Lakh outlets all across the country. The company’s sales have grown at a CAGR of 8.10% and the PAT has grown at a CAGR of 20.1%. Some of the popular brands that Britannia identifies with are Tiger, Good Day, Amrie, Milk Bikis, and Nutri Choice. The company also recorded a 52-week high of Rs. 4010.00 and the 52-week low being Rs. 21,00.00. However, the market capitalization of the industry is at Rs. 89,582.63 Crores.
Godrej Consumer Products Ltd.
Godrej is considered the market leader in the hair color and insecticide segments. It has a market capitalization of Rs. 66,624.36 Crores and has recorded a 52-week high and low of Rs. 772.00 and Rs. 425.10 respectively. The investors are also offered a 1.15% dividend which attracts many more investors.
With these consumer stocks, it would be best to begin your investment journey with consumer goods. Consumer stocks are considered a safe option as they mitigate risks during testing times of economic distress.