This article will highlight seven consumer stocks to buy in 2023, and here’s why. While energy and bank stocks are strong choices, the investor should not count out the consumer. Inflation and rising interest rates were supposed to crush consumers in 2022, but that didn’t happen, at least not to the extent investors expected.
However, that may be changing. In the last quarter there’s been a definite shift in way several companies are viewing their earnings outlooks. It’s possible that companies are racing to lower the bar so they can surprise to the upside. Nevertheless, the effect of interest rates is just beginning to be felt in the economy, and that means consumers may be wearing down. So, if their forecasts are correct, it’s going to be a challenging year.
That being said, consumers will still buy, but those purchases are likely to be more selective. Therefore, when considering consumer stocks to buy, this may not be a time to look for perfection. It is, however, a time to have conviction in companies that provide products and services that will be in demand, no matter what is happening in the economy.
Here are seven consumer stocks to buy that will help you ride out the volatility in 2023.
|Advance Auto Parts
|Procter & Gamble
Advance Auto Parts (AAP)
Used car prices are coming down, and that may good for those consumers who have nursed their current ride through the pandemic and record-high inflation. It may also be more bullish for a company like Advance Auto Parts (NYSE:AAP) than you may think.
Automobiles have a long shelf life. The way I see it, the biggest threat to auto parts dealers is electric vehicles which have fewer moving parts. At the same time, cars are long-term investments.
So, every used car with an internal combustion engine that’s bought in the next year is potentially one less electric vehicle in the short term. That may not be the case in ten years, but it looks like the case today.
AAP stock is down approximately 39% in 2022. The company is having difficulty meeting year-over-year revenue and earnings comparisons. And with the company’s profit margin being lower than the sector average it implies that the company continues to struggle with passing along higher costs.
However, the company has taken steps to speed up its inventory turnover. That would expand margins and boost earnings, both of which should result in share price growth. Plus, it will secure a dividend that currently has a yield of 4.10% and pays out $6 per share on an annual basis.
Next on my list of consumer stocks to buy is Coca-Cola (NYSE:KO). The logic here could be summarized as ‘if it’s not broken, why fix it’. Coca-Cola is a well-known Warren Buffet stock; so one of the first places to look is the company’s dividend. The company is part of the exclusive dividend kings club, having increased its dividend in each of the last 60 years.
I won’t pretend that Coke is an inexpensive stock. It has a P/E ratio well above the sector average. However, it continues to justify that premium valuation. Despite the challenges of the last two years, Coke continues to grow earnings, and more of the same is expected in 2023. One reason for that is a profit margin of over 20% that highlights the pricing power of the company’s products.
Detractors may point out that KO stock has not been a particularly strong performer. I’m not here to disagree. But in 2023, investors should still be thinking about keeping it in the fairway. And if you drive the ball like me, you’re looking for stocks that are more forgiving.
Normally I wouldn’t put both Coca-Cola and PepsiCo (NASDAQ:PEP) on a list like this. But when it comes to consumer stocks to buy in 2023, you can’t go wrong with either one.
I think Coca-Cola might deliver slightly stronger earnings growth. However, PepsiCo has a broader portfolio that includes both beverages and snack foods. And while the company’s offering does include Doritos (a staple in my house), some of the other offerings, such as those in its Quaker Foods division, are on the healthier side.
Putting that aside, this is a low beta stock with strong fundamentals. Its profit margin is slightly above the sector average. The company’s P/E ratio is a bit on the high side, but it seems to be backed up by projections for strong growth in the next five years.
And while Coca-Cola is a legendary dividend king, Pepsi has also entered that exclusive club. The company has now increased its dividend in 50 consecutive years and has a dividend yield of 2.55% as of this writing.
General Mills (GIS)
General Mills (NYSE:GIS) makes this list of consumer stocks to buy, despite the GIS stock price currently being above analysts’ forecasts. GIS stock shot higher after its earnings report on December 20, 2022, but it’s since given up most of those gains as analysts are concerned about declining revenue in its pet food segment.
However, in that earnings report, General Mills scored a slight beat on both the top and bottom lines. And, it raised its earnings outlook for 2023. That’s got to be worth something, right?
Maybe it will; it’s too early to tell. However, as I wrote about Coca-Cola, this is a time when investors need to look for reliability. That’s what you get with GIS stock. If the company does continue to post earnings growth, it may breakout to a new record high. And if that happens, then the company’s dividend, which currently has a 2.58% yield, will look even better.
Procter & Gamble (PG)
Stock charts can tell you what’s happening with a stock. It’s up to you to figure out why. Procter & Gamble (NYSE:PG) stock is down over 7% in 2022. But, it’s ticked up in the last month. The company last reported earnings in October. So, why are investors diving into PG stock?
In the past, capitulation has meant that investors bailed out of stocks altogether. In 2022, that may very well mean that investors are giving up on sensational growth and fleeing to the security of reliable dividend payers. With a track record of increasing dividends for 66 consecutive years, Procter & Gamble certainly fits that description.
Earnings aren’t supposed to grow that much in 2023. But at a time when many companies are predicting declining earnings, that gain should be celebrated. And the company has a P/E ratio that’s in-line with the sector average. The company also has one of the sector’s, and the market’s, best profit margins.
Camping World (CWH)
Camping World (NYSE:CWH) may seem like a wild card among consumers stocks to buy. The bears will say that RV sales peaked in 2021. Therefore, higher interest rates and recession fears will slow sales of discretionary purchases like camping equipment.
But while the company’s forward sales may be normalizing, major RV manufacturers are still filling their pandemic backlog. And once consumers have a recreational vehicle, it just makes sense to use it. Plus, while camping equipment is an expense, once the equipment is purchased, it can last for years, making camping an economical alternative for many consumers.
To be fair, I don’t expect Camping World to continue growing its dividend at the 34% clip it has for the last three years. But at a P/E ratio of just 4x earnings, Camping World looks like a small-cap steal while it’s trading near its 52-week low.
Mondelez International (MDLZ)
Last on my list of consumer stocks to buy is Mondelez International (NASDAQ:MDLZ). I’ve had MDLZ stock on my watchlist for most of 2022, and 2023 may be the year I pull the trigger.
The company has a broad portfolio that includes snack foods, such as Oreos and chocolate candy. The company’s products remain in demand as is seen in rising year-over-year revenue and earnings.
That means the company has pricing power. That’s one reason MDLZ stock is slightly higher in 2022, despite being down close to 20% as recently as September 2022. In 2023, like 2022, companies will be rewarded for having pricing power. Mondelez is also growing in emerging markets.
And Mondelez hasn’t just been growing its business; it’s been growing its dividend. Over the last three years, the company has posted an average of over 11% growth in its dividend. It currently has increased its dividend in each of the last 10 years and has an attractive yield of 2.31%.
On the date of publication, Chris Markoch 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.