Please ensure Javascript is enabled for purposes of website accessibility

As the Market Hammers Consumer Stocks, Here's Where to Invest $1,000

By Howard Smith - Updated Mar 12, 2020 at 11:21AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you have money on the sidelines to invest, think about these new opportunities the market is offering.

Market corrections usually don't occur just because valuations get stretched. There is normally a catalyst, and that catalyst almost always comes with uncertainty.

The novel coronavirus pandemic seems to be the catalyst this time, and now turmoil in the oil market has joined in. But investors can take advantage of the sell-off, especially when the underlying business has room to run and the market dynamics bring a better valuation. Today is one of those times. 

Here are three familiar names where the business outlook remains strong, even with the short-term uncertainty brought by recent events. If you were savvy enough to have some investable cash available waiting for that market pullback, think about putting it into these businesses now. 

investable money

Image source: Getty Images.

1. Garmin: Navigating rough markets

Garmin Ltd. (GRMN 1.48%) used to be known for its GPS personal navigation devices, but that market sank when smartphones with GPS became ubiquitous. Garmin has reinvented itself, though, with its non-automotive segments driving its growth. Automotive now makes up less than 15% of its annual revenue, and the other segments have been on a strong growth trajectory for several years. 

These results reflect the strong growth in the other segments that now drive the business.

Segment Three-Year Compound Annual Growth Rate
Outdoor

18.5%

Fitness

8.3%

Marine

15.7%

Auto

(16%)

Aviation

18.8%

DATA SOURCE: GARMIN FINANCIAL FILINGS. CALCULATED FOR FULL-YEAR REVENUE FROM FISCAL 2017 THROUGH FISCAL 2019.

After beating raised expectations in 2019, management sees sales growing by 6.5% in 2020. It routinely beats its conservative outlook, but even if that doesn't continue as current events mute consumer spending, the 22% pullback in the stock from its recent high has made it a compelling buy.

The price-to-earnings ratio is back to where it was two years ago, while sales, profitability, and the company's balance sheet are stronger than ever. With a recently announced 7% dividend increase, virtually no debt, and $2.6 billion in cash and marketable securities, this cash flow cow has plenty to continue to grow the business and reward shareholders along the way.  

2. Coca-Cola: Have a Coke and a smile

Coca-Cola Co. (KO -1.71%) has been a reliable investment for decades. It's not by coincidence that it remains in the top five holdings of Warren Buffett's Berkshire Hathaway. This consumer staple has successfully navigated many economic cycles and is positioned well for the next downturn. 

Coca-Cola's revenue grew 9% in 2019, showing that its product initiatives are increasing share in their respective segments. Its trademark brand grew 6% with offerings like Coca-Cola Zero Sugar expanding its footprint, and its juice and smoothie brand, innocent, continuing to grow. With cash from operations up 37% and free cash flow up 38% for the full year last year, Coca-Cola looks to continue to be a good defensive investment in turbulent times.  

While a global brand like Coke won't be immune to effects from the novel coronavirus pandemic, an advantage its size gives is to be able to source locally, avoiding supply chain disruption. The company has reaffirmed its 2020 outlook on Feb. 21, and intends to give another update in April on its earnings call. With China being its third-largest market by volume, recent developments seemingly showing COVID-19 has peaked there is welcome news for the company. 

3. Hasbro: A toy story worth telling

Some of the first companies affected by the coronavirus outbreak were toy manufacturers, due to the significant supply chain connections to China. Hasbro Inc. (HAS 1.01%) stock is about 37% off its recent 2020 highs, with a current dividend yield over 4%. With toy production for brands like the Walt Disney Co. (DIS 1.08%) Frozen and Princess, Marvel, Nerf, Star Wars and Transformers, the popularity of its products isn't a question.

On Feb. 21, Hasbro announced a multi-year renewal of the merchandising relationship for Disney's Marvel and Star Wars. This includes such popular characters as Iron Man, Black Widow, Spider-Man, Black Panther, as well as new offerings like Baby Yoda from The Mandalorian. The rollout of Disney+ streaming could be another runway for growth for these characters. And the recent market has provided an opportunity. 

HAS PE Ratio Chart

HAS PE Ratio data by YCharts

As a defensive play in an uneasy market, Hasbro has a sustainable dividend at its current share price, with a payout ratio of about 65%. Along with a strong pipeline and the lower stock price, this looks to be at a good valuation for investment.  

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Coca-Cola Company Stock Quote
The Coca-Cola Company
KO
$63.28 (-1.71%) $-1.10
Hasbro, Inc. Stock Quote
Hasbro, Inc.
HAS
$82.17 (1.01%) $0.82
Garmin Ltd. Stock Quote
Garmin Ltd.
GRMN
$99.95 (1.48%) $1.46
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$97.18 (1.08%) $1.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.