Forget Procter & Gamble, Investors Need to Check Out Nestle

Even though Procter & Gamble is often the first choice in the consumer sector, here's why you should give credence to Nestle as well.

Jun 23, 2014 at 2:45PM

It sounds ridiculous to suggest that a $247 billion company could possibly fly under anyone's radar. But when you think of consumer staples stocks, chances are the usual suspects like Procter & Gamble (NYSE:PG) come to mind. There's obviously good reason for this, since P&G is one of the biggest companies in America with dozens of universally known brands.

And yet, P&G is a smaller company than the one I'm referring to. The company I'm alluding to is Nestle (NASDAQOTH:NSRGY), the largest consumer goods company in the world.

Despite its huge size and stature, Nestle might not be as well-known as some of its American counterparts. Nestle is headquartered in Switzerland, and doesn't trade on a major U.S. exchange. In fact, Nestle shares trade over the counter. But in no way does that make Nestle less deserving of your attention.

Brand strength and diversity provides scale
There's a reason Nestle has resisted calls to split itself or spin off certain brands. Management believes that operating a company of its size holds inherent advantages, particularly when it comes to research and development. R&D investments in one area of the business, such as in nutrition on the health sciences side, which can directly aid other groups. This allows it to keep overall costs low and produce strong profitability, even while sales growth remains modest.

Nestle sells everything from candy bars, to bottled water, to pet food. In all, Nestle holds more than 2,000 brands and it offers them in more than 80 countries. To some, this may be considered reason to pursue a spin-off. Some investors believe that the company's parts are worth more than the whole.

But keeping its massive brand portfolio under one umbrella hasn't held Nestle back. In fact, Nestle produced 4% organic sales growth last year along with 11% growth in earnings per share in constant currencies. This is a testament to the company's powerful brands and its ability to effectively manage costs.

And, Nestle's global reach means the company is realizing strong growth from the emerging markets. Last year, Nestle produced 9% organic sales growth in the emerging markets, compared to just 1% in the developed markets.

A huge and diversified brand portfolio is what makes P&G such a strong company as well. P&G has been in business for 176 years, and sells its products in more than 180 countries across the globe. It holds 25 brands, which each bring in at least $1 billion in annual sales. Just a few of its core brands include Tide, Crest, and Gillette.

This has allowed P&G to post strong, consistent results year in and year out for decades. In turn, shareholders have been rewarded handsomely. P&G has passed along increases to its dividend for 58 years in a row. Likewise, Nestle maintains a serious commitment to paying a strong dividend, which gives investors income in addition to growth.

Nestle has plenty to offer
Nestle might not be your first choice in the consumer staples space, but you'd be wise to consider it, if you're looking for a company that can offer both growth and income. Nestle has a huge portfolio of well-known brands, which provide dependable profits that allow it to pay a solid 3% dividend. And before you get to thinking that this is a lumbering giant, you should know that the company is growing, particularly in emerging markets.

Nestle management contends its size is an advantage, because it allows the company to "scale up" research and development costs. So despite its size, it's by no means out of room to grow.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Bob Ciura has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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