As the financial markets continue to grapple with concerns over financial stability, investors seeking solace and potential returns would want to consider consumer stocks to buy.
These resilient enterprises focus on fulfilling essential needs and thus benefit from a powerful captive audience catalyst. While retail and consumer stocks have recently displayed relatively meek performance, a handful have reported robust, strong operating results.
This uneven landscape has left multiple undervalued consumer stocks to buy ripe for the picking.
According to a forecast by Ernst and Young, the US economy may initially worsen before ultimately rebounding emphatically. A cocktail of elevated prices, high-interest rates, and tightening credit conditions have negatively affected the business environment.
The eventual resurgence presents an opportunity to effectively capitalize on the best consumer stocks to buy for 2023, particularly consumer cyclical stocks.
Kroger (KR) Supermarket. The Kroger Co. is One of the World's Largest Grocery Retailers.
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Kroger (NYSE:KR), the versatile retail giant, has effectively carved out a unique niche in the market. Known for its supermarket and multi-department store operations, it offers its investors a healthy balance of stability in bear markets and growth in bull markets.
For three decades, Kroger has showcased remarkable consistency, with EBITDA margins in the 4% to 5% range and net income margins around 1% to 2%.
Its commitment to inorganic growth lends it an extra sparkle, effectively allowing it to minimize risks during bear markets.
Despite operating in a challenging macro environment last year, its year-over-year revenues grew remarkably 7.5%, roughly 80% higher than its 5-year average.
It boasts an A-rated dividend profile, with a 2.1% yield and 16 consecutive years of dividend growth. That makes it one of the best consumer stocks to buy out there.
Archer Daniels Midland (ADM)
Archer-Daniels-Midland (ADM) logo on sign at office campus
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Archer Daniels Midland (NYSE:ADM) is an agricultural powerhouse, standing tall among the top U.S. farmland product companies.
ADM elegantly caters to a global array of food, feed, and industrial markets and creates irresistible value for its customers and shareholders. It’s a dividend aristocrat, having grown its payout for almost 30 consecutive years.
On top of that, its stock trades at just 0.4 times forward sales estimates, roughly 60% lower than the sector average.
In a recent display of financial finesse, the company reported an adjusted segment operating profit of $1.725 billion in the first quarter, surpassing the previous year’s $1.56 billion.
In nine of the past ten quarters, ADM has surpassed expectations on both lines, a testament to the quality of the business. Its spirited performances further cement ADM’s reputation as an innovative, value-driven player in the agricultural domain.
General Mills (GIS)
A General Mills (GIS) sign on a General Mills office in Ontario, Canada.
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General Mills (NYSE:GIS) is a top-tier global manufacturer of consumer foods, boasting a vibrant array of products from yogurt to frozen pizza.
With a portfolio of iconic brands under its belt, it never ceases to captivate the taste buds of its loyal customer base globally.
In a brilliant strategic move, General Mills has expanded its offerings towards healthier products, poised to add a layer to its growth story.
The plant-based industry is rocketing forward, as Statista predicts its value to grow to a whopping $161 billion by 2030, a 450% increase from 2020 positioning at the forefront of this gastronomic revolution. The firm has achieved impressive profitability over the last two years.
Its track record has been incredible over the years, marked by robust single-digit sales and profitability numbers. It’s been an excellent wealth compounder, with GIS stock generating almost 100% return in the past five years.
Starbucks (SBUX)
the Starbucks (SBUX) logo on a sign outside of a coffee shop
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Starbucks (NASDAQ:SBUX) is a coffee titan with an irresistible allure, captivating caffeine aficionados, securing its position as a powerhouse for years to come.
The vibrant brand has consistently delivered robust sales and earnings for its customer base. Its customer base globally has increased by a spectacular 83% from 2013 to 2022.
Hence, the impressive growth has supported its impressive shareholder rewards, marked by 12 consecutive years of dividend growth.
Additionally following the Luckin Coffee debacle, Starbucks should maintain a formidable presence in the massive Chinese coffee market.
As China reopens and sales bounce back in the latter half of the current year, the company’s management forecasts margin improvements driven by operating leverage.
Results in the past year have exceeded historical averages, excluding the Chinese effect and the impact of market headwinds.
Starbucks continues to brew success and enchant customers, ensuring cash flows and growth remain as robust as a perfectly balanced espresso.
Dick’s Sporting Goods (DKS)
Exterior of Dick's Sporting Goods retail store including sign and logo.
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Dick’s Sporting Goods (NYSE:DKS) is a champion in producing retail sporting goods, sprinting ahead thanks to its enticing athleisure merchandise and strong connections to the sports realm.
It flexed its financial muscle, delivering another top and bottom line beat during the fourth quarter with 7.4% YOY revenue growth.
The retailer shared robust full-year earnings guidance, exceeding analysts’ expectations while doubling its dividend payout.
Its seamless transition into e-commerce and the demise of competitors like Modell’s and Sports Authority have bolstered its market position.
In addition, the company’s strategic focus on branded apparel for sports teams is exemplified by its alliance with the NCAA and Warner Bros Discovery (NASDAQ:WBD).
With effective cost management, the firm delivered a net income margin and a return on common equity, which exceeds its historical averages in the past year.
Village Super Market (VLGEA)
A photo of fresh and canned goods in a rustic grocery market display.
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Village Super Market (NASDAQ:VLGEA) is a close-knit, family-managed supermarket enterprise, operating 34 supermarkets alongside four specialty markets in New York.
Despite its appealing business model, its market performance appears somewhat subdued. It’s paid a dividend in the past 11 consecutive years, with a yield of over 4.5%.
Perhaps the stock’s most attractive aspect is its business’s financial flexibility. It has a rock-solid cash balance of $124.5 million, with a cash-to-debt ratio of 0.31, a 180% improvement from its 10-year median.
Its GF score, a popular Gurufocus metric evaluating a firm’s profitability, financial strength, and valuation, is at an amazing 84 out of 100. With its fortress-like balance sheet, it will continue to reward its shareholders.
United Airlines (UAL)
The side of a United Airlines (UAL) plane with "united" written above passenger windows. Represents airline stocks.
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United Airlines (NASDAQ:UAL) kicked off 2023 with a soaring start before experiencing a pullback as investors cashed in on profits amid recession fears. However, airline traffic should remain strong throughout the year despite a potential economic downturn.
It generated record-breaking operating cash flow in the first quarter. Also, a remarkable 61.8% increase in passenger revenues, driven by a surge in international and domestic demand, showcases United’s resilient business.
Likewise, as business travel bounces back, the airline remains on course to achieve its full-year adjusted diluted EPS target. Hence, United Airlines appears well-equipped to weather any storm regardless of a recession.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
