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We’ve been seeing more down days than up in the stock market recently, and it’s giving many investors understandable anxiety.
But in times of stress, the consumer staples sector is a good one to look to. Companies in this sector offer products that consumers need regardless of the economic conditions, making them great options for safe places to put your money.
Here are three consumer staples stocks I’ve got my eye on now.
Walmart (NYSE: WMT)
After a stellar second quarter, the retail giant reported last week that its U.S. comparable sales rose a solid 3.4% compared to the same quarter a year ago, and the company reported healthy sales across a broad range of products, from back-to-school supplies to health and wellness items.
What was particularly interesting in the report were Walmart’s grocery business results. The company’s grocery segment is perhaps its most important asset as it wages war with Amazon.
Last quarter, the company reported its best comparable sales growth in nine years in the segment, and while this quarter wasn’t quite as strong as last, comparable sales were still up in the “low single digits” according to the company, and Walmart’s fresh food unit saw “strong traffic.”
Walmart is continuing to build out its network of online order pick-up locations, which are now available in 2,100 stores. It’s now also offering grocery delivery at 600 locations. That’s leaps and bounds above what Amazon can boast: the online retailer only offers online order pick-up in 22 cities nationwide.
The company saw traffic at its stores up 1.2% in its third quarter, driven largely by Walmart’s effort to clean up and better stock its stores. And its fourth quarter promises to be a good one as the holiday shopping season kicks into high gear.
But here’s the real kicker: Walmart’s e-commerce sales jumped a whopping 43% year-over-year. If the company is able to demonstrate impressive e-commerce sales numbers during the crucial holiday shopping season, its likely the stock could see a jump.
Walmart is down -8.5% this week which presents an interesting buying opportunity. Analysts’ average price target for WMT is $104.03, indicating possible upside of 10.5% over the next twelve months.
Just last week, Stephens set its price target for the stock, rating it a buy and setting that price target at $117 – 24% higher than Tuesday’s closing price.
Dollar Tree (NASDAQ: DLTR)
In the age of online shopping, consumers will head to a brick-and-mortar if they’ll save money there. And this dollar store leader is the poster child for that fact with its cheap finds.
The stock is down -24% year-to-date, and trades at a considerable discount compared to its biggest rival, Dollar General Corp (NYSE: DG). Dollar Tree is now trading near a five-year low and has been punished for its purchase of the struggling Family Dollar stores three years ago, which the company is now in the process of renovating and rebranding.
While the Family Dollar acquisition has been a drag on the company, there’s now chatter that an activist investor may be interested. According to Barron’s, both Carl Icahn and Nelson Peltz were Family Dollar shareholders before the Dollar Tree acquisition, and encouraged the sale.
And now Carl Icahn has reportedly taken a large stake in Dollar Tree, and the speculation is that he will try to get the company to sell Family Dollar – an ironic twist since it was Icahn who encouraged the sale in the first place.
But it could be the right move. Before the acquisition, Dollar Tree had the best operating margins by far compared to Dollar General and Family Dollar, and Family Dollar has been dragging down margins to where they are now comparable with Dollar General’s. DLTR also far exceeded the performance of its rivals by a nearly two-to-one ratio. Since the acquisition though, Dollar General has outpaced Dollar Tree by tenfold.
Thus, without the Family Dollar anchor dragging down the Dollar Tree ship, we could see the company thrive again.
The average twelve-month price target for DLTR is $101.16, suggesting possible upside of 24%. Last month, KeyCorp boosted its price target to $115 – 41% higher than the current price.
TJX Companies (NYSE: TJX)
TJX Companies (NYSE: TJX) offers quality at a discount at its TJ Maxx and Marshall’s stores, something shoppers look for when things are looking bleak. But it also offers something that makes the stock even more enticing: growth.
The company currently operates 4,000 stores, and management expects to see it grow to 6,100 stores. In its fiscal second quarter, the company reported 6% comps growth, with year-to-date top line growth at 11%. Those are big numbers for a big, multi-billion dollar brick-and-mortar-focused retail chain.
But what’s really interesting about TJX is its venture into the home furnishings market. The company is expanding its Home Goods brand of stores, and those stores are doing well. What’s more, the last recession showed us that consumers want to spend on improving their homes when times are tough rather than buy a new home. Home Goods could thus be a big benefit to TJX if the economy tanks.
TJX has taken a tumble recently and is down nearly -13% over the past week, but based on what we’ve already discussed, expect to see a rebound.
Analysts’ average twelve-month price target for TJX is $53.68, indicating potential upside of 14.65%. DA Davidson recently initiated coverage of the stock, rating it a Buy and setting their price target at $65 – 38.8% above the price as of this writing.