3 Top Consumer Goods Stocks for 2014

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CVS Caremark (NYSE: CVS  ) leads the list of my top three picks in the consumer-goods sector along with Starbucks (NASDAQ: SBUX  ) and Whole Foods Market (NASDAQ: WFM  ) . Each of these companies had a solid year and is well positioned for future growth. This article looks at each of these consumer-goods buys in the coming year.

CVS Caremark leads the retail pharmacies
CVS Caremark had an excellent year. Since the beginning of 2013, its share price has climbed from $51 and is now hovering at $68 per share.

In the third quarter, the company reported net revenue increased $1.7 billion, or 5.8%, and $2.2 billion, or 2.4%, in the three and nine months, respectively, ended Sept. 30, compared to the same periods in 2012. However, CVS also noted net revenue was adversely affected by increased generic sales and generic dispensing rates for both the pharmacy services and retail pharmacy segments.

In other words, the company makes less money from these sales than name-brand pharmaceuticals. But CVS has taken steps to meet this challenge with the recently announced joint venture with Cardinal Health. The deal is designed to enhance efficiencies and lower costs in the delivery and sale of generics while providing CVS with a steady income stream during the 10-year term of the strategic alliance.

This move, along with the acquisition of Core Infusion from Apria Healthcare, will ensure future revenue and earnings growth, making the retail pharmacy a good bet for 2014 and beyond.

Starbucks continues to brew
Starbucks' best move in 2013 was the $100 million acquisition of bakery chain La Boulange. Acquiring this line allows the big barrista to offer a wider array of baked goods and sandwiches in order to attract more lunchtime customers. Starbucks expects all of its U.S. stores to carry La Boulange products in the coming year. 

The acquisition is aimed at not only boosting long-term revenue and earnings growth, but competing more effectively with the outfit's main rival, Panera Bread. And this growth strategy is working, as evidenced by Starbucks' most recent earnings announcement.

The company reported fourth-quarter and year-end results at the end of October. In short, total net revenue increased 13% to $3.8 billion along with very robust growth in earnings per share of 37% to $0.63 per share. Most important, the company anticipates revenue climbing by another 10% in 2014, which will fuel earnings.

These are good signs for investors, even if the company's stock trades at a pricey $77 and change. In the final analysis, the company is expanding its brand overseas by penetrating new markets in China, India, and South America.

Whole Foods is wholesome and socially responsible, too
Whole Foods Market is the leader in natural- and organic-foods supermarkets. And the organic market maker also supports sustainable agriculture. In fact, the company is the first "certified organic" grocer in the U.S.

During the fourth quarter of fiscal 2013, its revenue climbed 2% to nearly $3 billion. Whole Foods' management also expects total sales to grow from 11% to 13% for the coming fiscal year. The company is presently trading at about $59 per share, still off the 52-week high of $65.39, and investors should see continued price improvement if the company achieves its sales forecasts by opening new stores in the U.S.

Final foolish thoughts
As always, investors should note that past performance of these companies is not indicative of future results. While these companies had solid revenue and earnings growth in 2103, their share prices have also been boosted by record highs across a number of exchanges. And the question remains as to how much the Federal Reserve's easy-money policy has influenced market behavior.

But the Fed's announcement this week of a $10 billion "tapering" of its asset-buying program with no interest rate changes in the near future actually fueled a market rally. In any event, all of these companies look like solid choices for investors with a long-term view.

In the final analysis, investors should keep it simple by investing in shares of companies they know and understand that offer products and services they use and/or like; and always consult a financial advisor with creds on the Street, so to speak, and a good track record.

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Related Tickers

9/27/2016 11:52 AM
CVS $90.45 Up +0.53 +0.59%
CVS Health CAPS Rating: *****
SBUX $54.03 Down -0.02 -0.03%
Starbucks CAPS Rating: ****
WFM $28.54 Down -0.11 -0.40%
Whole Foods Market CAPS Rating: ****