4 Companies to Hold for the Long Term
Sep 4th 2013 9:28AM
Updated Sep 10th 2013 10:28AM
Companies from the consumer goods sector can make good long-term investments. Consumer companies make things that people need every day such as laundry detergent, shaving cream, tooth paste, and food. Customers continually return for their products providing these companies with some immunity from economic ups and downs. You can buy shares in these companies knowing that customers need their products and ensuring a better chance of long-term superior returns. The four companies below sell products essential to modern life.
Bottled water and juice
Beverage giant Coca-Cola built its business around its portfolio of sodas such as Coca-Cola, Fanta, and Sprite. Later it expanded into areas such as bottled water, tea, and juice. Over the past five years Coca-Cola delivered a total return of 70% versus 44% for the S&P 500. Trends point to a slow shift away from Coke's bubbly portfolio to its healthier non-sparkling products. Non-sparkling volume increased 6% in its most recent quarter. Coca-Cola can leverage its distribution system to capitalize on the healthy lifestyles trend enabling it to profitably sell its water, orange juice, and tea at competitive prices allowing for more long-term growth.
Spices and gravy
Flavoring company McCormick sells items that improve your eating experience such as salt, pepper, and gravy mixes. It even sells honey in the Canadian market. Over the past five years McCormick gave investors an 88% total return versus 44% for the S&P 500. The company sells products to grocery stores for individual use and to the industrial food preparation industry. Consumer and industrial sales increased 4% and declined 1% respectively in its most recent quarter. This indicates that the consumer wants to eat in more, stemming from macro-economic pressures. International expansion and new product varieties will move this company forward. Catering to the industrial and consumer markets means that the company can benefit from the eventual return of the consumer to restaurants.
Peanut butter, jelly, and coffee
Food conglomerate J.M. Smucker makes the famous Smucker's jelly, Jif peanut butter, and Folgers coffee. This company enjoys a rich history going back over a century, and consumers are familiar with its portfolio of products. Over the past five years the company gave its investors a 144% total return versus 44% for the S&P 500. J.M. Smucker's operating income jumped 12% due to volume increases stemming from price cuts taken on coffee and peanut butter. Like most large companies its future lies in international expansion. It also realizes the impact of the healthy lifestyles movement. On Aug. 21, the company bought Enray, "A leading organic, Gluten-Free Ancient Grain Company." You may see further strategies pertaining to organic food in the future from this company.
Toothpaste, detergent, and baking soda
Personal products company Church & Dwight sells the famous Arm & Hammer branded detergent and baking soda. It also sells Orajel instant pain relief products, pregnancy tests, and hair remover. Church & Dwight delivered a total return of 101% versus a 44% return for the S&P 500 over the last five years. Unlike the other three companies Church & Dwight is relatively small and nimble. Increasing market share boosted revenue 13% in its most recent quarter. Management's focus on the small stable of brands such as Arm & Hammer, Nair, and Oxiclean will prove invaluable to expanding shareholder value over the long term. After all it's easier to grow from a small base.
On the whole, these companies sell products crucial to modern-day living such as bottled water, spices, peanut butter, and laundry detergent. People will buy these products over and over as they use them up in good times and bad. These qualities make it easier for you to hold the stocks over the long term, minimizing transaction costs and taxes.
The article 4 Companies to Hold for the Long Term originally appeared on Fool.com.William Bias owns shares of Coca-Cola. The Motley Fool recommends Coca-Cola. 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.
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