Consumer goods stocks offer a great starting point for new investors because they often have business models that are straightforward and easy to understand. Moreover, uncovering wealth building stocks and investing in them for the long haul doesn't need to be challenging. It's in this spirit that we've asked some of our top contributors, which consumer stock they would buy if they could only choose one. Find out below why Starbucks (SBUX 1.00%), Disney (DIS 0.18%), and WhiteWave Foods (WWAV) are three of the top consumer stocks to own today.
Brian Stoffel: If I were limited to buying just one consumer goods stock for my portfolio, it would be Starbucks (SBUX 1.00%). Perhaps most importantly, I'm a big believer in companies that have a bigger purpose than simply selling more stuff. From the outset, founder and CEO Howard Schultz has made it clear that he wants Starbucks to create a third place -- aside from work and home -- where a community can come together.
If anyone doubts that sentiment, they simply need to look at what Schultz did when he came back to the helm of the company in 2008, after an eight-year hiatus. He closed down hundreds of locations, stopped the selling of food, which was changing the aromatic ambiance of Starbucks locations, and had all Starbucks baristas go through intensive retraining.
It also turns out that doing business the way that Schultz does is very profitable. While those of us in America often joke about a Starbucks being located on every corner, emerging economies have an insatiable appetite for what Starbucks is serving as well. In fact, the city with the most Starbucks locations isn't even in America -- it's Seoul, South Korea.
It's true that Starbucks stock isn't cheap. Currently, it trades for 29 times earnings. But it is targeted on churning out revenue growth of 17% next year while opening 1,650 new locations. Over time, the P/E may come down, but I fully expect its dividend to start ramping up when that time comes.
As long as Schultz is at the helm -- which I think he will be for a while, and people enjoy a jolt of caffeine while socializing with their community -- which I truly hope never changes, Starbucks is the consumer goods stock for me.
Joe Tenebruso: If I could only buy one consumer stock, it would be Disney. That's because it's almost like an entertainment mutual fund, with its vast collection of valuable brands (Marvel, Pixar, Star Wars, and of course, Disney itself), hard-to-replicate theme parks and resorts (Disney Land and Disney World), dominant cable sports properties (ESPN), popular TV networks (ABC), and a growing interactive media segment spearhead by Disney's Infinity game. These assets help to diversify Disney's revenue streams and produce billions in free cash flow that Disney then passes on to shareholders in the form of stock buybacks and rising dividend payouts.
Disney also has a superb management team, led by CEO Bob Iger. Iger became CEO of Disney in October 2005 and Chairman in March 2012. He has instilled in the company a focus on three main strategic areas: generating the best creative content possible, fostering innovation and utilizing the latest technology, and expanding into new markets around the world. Iger has overseen the acquisitions of Pixar in 2006, Marvel in 2009, and Lucasfilm in 2012, all with impressive results. Over that time, Disney's share price has more than quadrupled.
All told, with a relatively low risk profile, diversified revenue streams, a shareholder-friendly capital return program, and excellent leadership, I believe Disney is an investment worthy of consideration for both new investors and retirees, and pretty much everyone in between.
Tamara Walsh: If you're not familiar with the moniker WhiteWave Foods, you probably know their products. The company's top brands include Silk soymilk and almond milk, Land-o-Lakes butter, and International Delight coffee creamers. WhiteWave is still in the early stages of its growth story, which is why if I could choose only one consumer name it would be this one. Sure, the stock has enjoyed a record 2014 with its shares climbing more than 68% in the past year. However, smart acquisitions and international growth are two catalysts that promise to carry the stock higher from here.
In addition to operating in the increasingly lucrative industry of organic and plant-based foods and beverages, WhiteWave is growing its portfolio of brands through strategic acquisitions. At the end of last year, WhiteWave jumped into the fast-growing organic produce segment by acquiring Earthbound Farm for $600 million. Earthbound is now the largest organic produce brand in North America -- generating net sales in excess of $500 million in 2013. This purchase should boost revenues for WhiteWave in the quarters ahead, particularly because the organic packaged salad category boasts a five-year compound annual growth rate of 15%.
International expansion in China is another reason for investors to get excited about WhiteWave Foods. The company has been steadily investing in the Chinese market for the better part of two years. And its efforts should finally start to payoff in 2015 thanks to a strategic joint venture with one of China's largest dairy companies, Mengniu Dairy. WhiteWave owns a 49% stake in the deal, which promises to be a boon for the company's international sales in the quarters to come as more Chinese consumers become familiar with WhiteWave's products.
Ultimately, this creates a massive opportunity for WhiteWave Foods because China is the world's largest consumer market with more than 1.3 billion consumers and a rapidly growing middle class. For these reasons, WhiteWave Foods is my top consumer stock pick today.
