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5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday

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- By Sydnee Gatewood

As the Kansas City Chiefs prepare to face off against the Tampa Bay Buccaneers on Sunday, investors may be looking to companies that benefit from the biggest professional football game of the year.

According to the National Retail Federation, 186.6 million consumers across the U.S. will spend an average of $74.55 each as they tune in to cheer on their favorite team during Super Bowl LV, down slightly from $89 last year. According to the annual survey, a majority of the$13.9 billion total will be spent on food and drinks for watch parties, followed distantly by team apparel and accessories, televisions, decorations and furniture.


Using the GuruFocus Fair Value Line, a new unique method of estimating the intrinsic value of a stock, investors can find potential value opportunities. Based on the popular Peter Lynch value line, which compares a stock's current price to how much its earnings per share would be worth if it traded at a price-earnings ratio of 15, the GF Value Line takes more than price into account when determining value. It also considers a company's historical price-earnings, price-book, price-sales and price-to-free cash flow ratios, an adjustment factor based on past returns and growth as well as future estimates of the business' performance.

Using the GF Value Line for JM Smucker Co. (NYSE:SJM) as an example, we can see that the stock is considered to be fairly valued. The share price is represented by the blue line, while the solid black line shows the past intrinsic values calculated by the GF Value Line. The dotted portion of the black line illustrates the estimates of future intrinsic value. The red and green bands delineate overvaluation and undervaluation, respectively, with the darker shades indicating more severe deviations from the intrinsic valuation.

5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday
5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday

As of Feb. 5, the GuruFocus All-in-One Screener, a Premium feature, found consumer defensive stocks in the S&P 500 that are fairly valued based on the GF Value Line, have a predictability rating of at least one out of five stars and a price-to-GF Value ratio between 1 and 2 included Coca-Cola Co. (NYSE:KO), PepsiCo Inc. (NASDAQ:PEP), Constellations Brands Inc. (NYSE:STZ), McCormick & Co. Inc. (NYSE:MKC) and Mondelez International Inc. (NASDAQ:MDLZ).

Coca-Cola

Coca-Cola (NYSE:KO) has a $213.54 billion market cap; its shares were trading around $49.74 on Friday with a price-earnings ratio of 25.9, a price-book ratio of 11.48 and a price-sales ratio of 6.41.

The Atlanta-based company is famous for its most well-known soft drink, Coca-Cola, as well as a variety of other nonalcoholic beverages like Sprite, Fanta, Vitamin Water and Fuze Tea.

Based on a GF Value of $46.01 and a price-to-GF Value ratio of 1.08, the stock appears to be fairly valued.

5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday
5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday

The GuruFocus valuation rank of 2 out of 10, however, leans more toward overvaluation.

GuruFocus rated Coca-Cola's financial strength 4 out of 10. Though the company has issued approximately $2.7 billion in new long-term debt over the past three years, it is still at a manageable level due to sufficient interest coverage. The company also has a high Altman Z-Score of 3.37, indicating it is in good standing despite recording a decline in revenue per share over the past five years.

The company's profitability fared better, scoring a 7 out of 10 rating on the back of an expanding operating margin and strong returns that outperform a majority of competitors. Coca-Cola also has a moderate Piotroski F-Score of 6, which suggests business conditions are stable, as well as a one-star predictability rank. According to GuruFocus, companies with this rank return, on average, 1.1% annually over a 10-year period.

Of the gurus invested in Coca-Cola, Warren Buffett (Trades, Portfolio) has the largest stake with 9.31% of outstanding shares. Jeremy Grantham (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), Ray Dalio (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and the MS Global Franchise Fund (Trades, Portfolio) also have sizable positions in the stock.

PepsiCo

PepsiCo (NASDAQ:PEP) has a market cap of $195.37 billion; its shares were trading around $141.75 on Friday with a price-earnings ratio of 27.98, a price-book ratio of 14.49 and a price-sales ratio of 2.88.

Headquartered in Purchase, New York, PepsiCo, which is known for its namesake soda Pepsi, also manufactures popular chips like Doritos and other snacks like Sabra's hummus.

With a GF Value of $135.48 and a price-to-GF Value ratio of 1.05, the stock appears to be fairly valued.

5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday
5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday

The GuruFocus valuation rank of 2 out of 10, however, is more indicative of overvaluation.

PepsiCo's financial strength was rated 4 out of 10 by GuruFocus. Although the company has issued approximately $5 billion in new long-term debt over the past three years, it is at an acceptable level due to sufficient interest coverage. The Altman Z-Score of 3.52 also indicates the company is in good standing.

The company's profitability scored a 7 out of 10 rating, driven by an expanding operating margin, returns that outperform a majority of industry peers, moderate Piotroski F-Score of 5 and consistent earnings and revenue growth. PepsiCo also has a three-star predictability rank. GuruFocus says companies with this rank return an average of 8.2% annually.

With 0.45% of outstanding shares, Pioneer is PepsiCo's largest guru shareholder. Other top guru investors include Dalio, Diamond Hill Capital (Trades, Portfolio), David Carlson (Trades, Portfolio), Cohen, both Yacktman funds and Grantham.

Constellation Brands

Constellation Brands (NYSE:STZ) has a $43.57 billion market cap; its shares were trading around $226.14 on Friday with a price-earnings ratio of 22, a price-book ratio of 3.3 and a price-sales ratio of 5.26.

The Victor, New York-based brewer produces and markets a wide range of beer, wine and spirits. It is also the largest beer import company in the U.S. by sales.

Trading with a GF Value of $218.37 and a price-to-GF Value ratio of 1.04, the stock appears to be fairly valued currently.

5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday
5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday

The GuruFocus valuation rank of 4 out of 10, however, leans more toward overvaluation.

Despite have sufficient interest coverage, Constellation Brands' financial strength was rated 4 out of 10 by GuruFocus. The Altman Z-Score of 3.33 indicates the company is in good standing even though its assets are building up at a faster rate than revenue is growing.

The company's profitability fared better with a 7 out of 10 rating. In addition to an expanding operating margin, Constellation is supported by strong returns that outperform a majority of competitors and a high Piotroski F-Score of 8, which suggests business conditions are healthy. It also has a one-star predictability rank.

Bill Nygren (Trades, Portfolio) is Constellation's largest guru shareholder with a 0.84% stake. Cohen, Pioneer, Diamond Hill, Dalio, Joel Greenblatt (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio), among other gurus, also own the stock.

McCormick

McCormick (NYSE:MKC) has a market cap of $24.21 billion; its shares were trading around $90.71 on Friday with a price-earnings ratio of 32.69, a price-book ratio of 6.21 and a price-sales ratio of 4.36.

The company headquartered in Baltimore is known for its spices and seasonings that enhance any recipe.

With a GF Value of $81.64 and a price-to-GF Value ratio of 1.10, the stock appears to be fairly valued currently.

5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday
5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday

The GuruFocus valuation rank of 1 out of 10 supports overvaluation, however.

GuruFocus rated McCormick's financial strength 4 out of 10 on the back of adequate interest coverage and a moderate Altman Z-Score of 2.67, which indicates the company is under some pressure since assets are building up at a faster rate than revenue is growing.

Boosted by an expanding operating margin, a good net margin and strong returns, the company's profitability scored an 8 out of 10 rating. In addition, McCormick has a high Piotroski F-Score of 7, while consistent earnings and revenue growth contributed to a 3.5-star predictability rank. GuruFocus data shows companies with this rank typically see their stocks gain an average of 9.3% annually.

Of the guru invested in McCormick, Pioneer has the largest holding with 0.21% of outstanding shares. Other top guru shareholders are Cohen, Dalio, Jerome Dodson (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Tom Russo (Trades, Portfolio), Greenblatt, Paul Tudor Jones (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Mairs and Power (Trades, Portfolio).

Mondelez International

Mondelez International (NASDAQ:MDLZ) has an $80.7 billion market cap; its shares were trading around $56.40 on Friday with a price-earnings ratio of 22.76, a price-book ratio of 2.95 and a price-sales ratio of 3.07.

Headquartered in Deerfield, Illinois, the company is known for its Cadbury, Milka, Toblerone and Sour Patch Kids candy products, as well as Oreo cookies, Wheat Thins crackers, Ritz crackers products and many other snacks.

Based on the GF Value of $54.05 and price-to-GF Value ratio of 1.04, the stock appears to be fairly valued.

5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday
5 Consumer Defensive Stocks to Consider Ahead of Super Bowl Sunday

The GuruFocus valuation rank of 3 out of 10 indicates overvaluation, however, since the share price, price-book and price-sales ratios are all near 10-year highs.

Mondelez's financial strength was rated 5 out of 10 by GuruFocus. Although the company has issued approximately $1.5 billion in new long-term debt over the last three years, it is at a manageable level due to having adequate interest coverage. The Altman Z-Score of 2.28 also suggests the company is under some financial pressure. The return on invested capital is also eclipsed by the weighted average cost of capital, indicating good value creation.

Supported by an expanding operating margin, strong returns that outperform more than half of its industry peers and a moderate Piotroski F-Score of 5, the company's profitability scored a 6 out of 10 rating. It also has a one-star predictability rank.

With 0.86% of outstanding shares, Trian Fund Management LP is Mondelez's largest guru shareholder. Other top guru investors include Diamond Hill, Pioneer, Hotchkis & Wiley, Cohen, Gabelli, Carlson, Dalio, Buffett, Louis Moore Bacon (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies and the T. Rowe Price Equity Income Fund.

Disclosure: No positions.

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This article first appeared on GuruFocus.