October means football, food, and fall colors. Oh, and did I mention Halloween, the new fall TV season, and holiday shopping deals? Amidst it all you'll find Motley Fool contributors shopping for stock deals in the consumer goods sector, just as we do every month.
This group includes a mix of usual suspects -- Disney (NYSE:DIS) and Amazon.com (NASDAQ:AMZN), notably -- and smaller stocks with big-time potential: Boston Beer (NYSE:SAM), GoPro (NASDAQ:GPRO), and organics specialist WhiteWave Foods (NYSE:WWAV).
Ready to learn more about these winners in the making, businesses we consider to be the top 5 consumer goods stocks to buy in October? Read on!
Andres Cardenal (Amazon.com): Amazon stock is delivering impressive performance in a challenging market environment. While the Nasdaq index is down by nearly 4% year to date, shares of the online retail leader are up by a staggering 62% in the same period.
The company is consolidating its competitive position as the unchallenged king in online retail. According to some estimates, Amazon could have as many as 60 million to 80 million Amazon Prime members around the world. This is an amazing competitive asset generating sustained customer loyalty and recurrent sales growth for the company over the long term.
Revenue during the second quarter of 2015 increased 20% year over year to $23.2 billion. That growth rate alone would be exceptional for a company as big as Amazon. Adjust for currency effects and revenue jumped by a jaw-dropping 27% versus the same period in 2014.
The North America retail division is Amazon's most mature segment, yet the business continues firing on all cylinders, with sales growing 26% last quarter. E-commerce still represents only 7.2% of total retail sales in the U.S., so Amazon still has plenty of room for expansion at home.
In addition, revenue from cloud computing exploded by 82% last quarter, reaching $1.82 billion. This provides an extra growth driver with massive potential in the years ahead.
Tim Beyers (Disney): When it comes to franchises, there's Disney and then there's everyone else. But you know that. What's interesting -- and what makes Disney so attractive at current levels -- is that the stock is down over 10% since July 1 despite an excellent performance at the box office and soaring attendance at its theme parks.
Look at Ant-Man. Marvel's underdog superhero flick has earned over $400 million worldwide on the lowest production budget in the history of Marvel Studios movies. At the same time, Disney is still home to nine of the 10 most-trafficked theme parks in the world. You don't achieve that sort of dominance without first cultivating an engaging brand.
There's simply no reason for Disney to be trading down the way it has, which is why last month I made the largest single investment I've ever made in Disney LEAPS, which is short for "long-term anticipation securities." Read all about the bet here, which I expect to result in no less than a double over the next year.
Steve Symington (Boston Beer): I think now's a perfect time for investors to take a swig of Boston Beer. Despite posting solid quarterly results two months ago, shares of the craft brewer are down 26% year to date as investors fret over weakness in depletions -- a measure for how fast its products travel from warehouses to consumer outlets -- in some Samuel Adams beer varieties. But at the same time, Boston Beer is also enjoying strength from its other brands including Angry Orchard, Twisted Tea, and Traveler Beer, the last of which only just began its national rollout in the prior quarter.
What's more, Boston Beer is working to continue improving its supply chain and reduce wholesaler inventories, while at the same time introducing new packaging and advertising in the current quarter to further bolster depletions growth. While these investments may mean sacrificing some near-term profits, I think Boston Beer management is wise to focus on its massive long-term opportunity with less than a 2% share of the U.S. beer market. As long as Boston Beer continues churning out superior product and delighting the taste buds of American beer drinkers, I see no reason that share won't continue to grow. Boston Beer's stock price should follow suit over the long term.
Tamara Walsh (WhiteWave Foods): Not only is WhiteWave Foods a leading consumer packaged foods and beverage company today, but it also operates in the fast-growing niche of plant-based and organic foods. This stock is a buy for many reasons, not least of which is because shares look reasonably valued at the stock's current price of around $40 a pop. WhiteWave currently boasts a price-to-earnings growth rate of 2.53, which is slightly below the industry average PEG of 2.89. And while the stock trades at 30 times next year's earnings, plenty of catalysts exist that could boost earnings in the quarters ahead.
Strategic acquisitions are one such move that could push the stock higher from here. After all, WhiteWave has proven its aptitude for seamlessly integrating complementary businesses in the past. The company scooped up dairy-free ice cream maker So Delicious last year for around $195 million. Thanks to robust sales of its So Delicious products, WhiteWave Foods' net sales in its plants-based business increased 26% in the latest quarter.
The company's latest acquisitions include Wallaby Yogurt Company and Vega, a popular plant-based nutritional business. Driven by a strong portfolio of brands that include Silk soy milk, Land-o-Lakes, and Horizon Organic, WhiteWave continues to achieve double-digit growth across most of its product categories today. With the stock reasonably priced and future growth on the horizon, I believe this is a top stock to own heading into 2016.
Anders Bylund (GoPro): So action-oriented camera specialist GoPro is no longer the appropriately high-flying daredevil stock it recently was. Having fallen a bloodcurdling 70% from last October's all-time highs, GoPro's price-to-earnings ratio has also dwindled from 95 to 25 times trailing earnings.
It kind of looks like the beginning of the end. GoPro's personal apocalypse is nigh -- investors had better run for the exits! Or, you can see it as a fantastic reminder of that old value-investing sawhorse: "Buy when there's blood in the streets."
GoPro's blood is indeed running thick and gooey across the alleys and avenues around Wall Street. But the company is hardly falling apart at its seams.
Trailing sales have jumped 72% higher year over year. Negative earnings have turned solidly positive, and GoPro also generates lots of healthy free cash flows these days. At the moment, $1.7 billion in trailing revenues yielded $163 million of free cash. Many highly successful businesses would sell their mothers for that kind of cash return on rapidly growing sales.
High growth meets plunging share prices. Sounds downright tasty, doesn't it? And here's the cherry on top: GoPro's stock is arguably falling for all the wrong reasons.
Investors worry about the lack of a brand-new camera series in time for this holiday season. Without a freshly unveiled flagship, the company will surely miss the most important sales season of the year, right?
However, last year's HERO4 lineup is still throwing its considerable weight around. Moreover, that generation of GoPro cameras is still spawning a plethora of new models. Will consumers hold off on buying the just-released HERO+ device or its reduced-price siblings, just because they don't come with a HERO5 moniker?
I don't think so and the holiday season will tell the tale. In the meantime, GoPro reports third-quarter results near the end of October. Management's guidance targets in that report will set the tone for the rest of 2015.
This hypergrowth story is far from over, but you can still buy the shares at bargain-bin prices. And I'd be surprised if that discount lasts through the end of October.