The current bear market continues to struggle under heavy inflation and mixed signals on the possibility of recession. When labor and financial markets get a bit iffy, consumer goods often shine as safe refuges, if not growth opportunities, for smart investors. These three companies have shown over the past five or more years that they have what it takes to handle difficult challenges and come out strong.
PepsiCo (PEP -0.28%) combines the strength of its beverages with the Quaker Foods and Frito-Lay lineups of foodstuffs and related goods to maintain its place on shelves worldwide. Costco (COST -1.29%) brings bulk shopping home, helping consumers save on larger purchases of food and family staples. Shoppers can turn to Etsy, Inc. (ETSY 0.10%) just as easily as any big retailer these days for clothing, luxury, and custom goods. Each of these NASDAQ stocks offers benefits for those looking to invest to secure their funds or even grow them if and when the markets even out.
A shelf-stable powerhouse
PepsiCo benefits most from its worldwide presence and exceptional product lineup. This recession-resistant stock pick owes much of its current success to careful acquisitions of products beyond its key beverage offerings. The company continues to show strong growth in its Quaker Foods and Frito-Lay offerings, with the North American divisions each delivering 14% increases in revenue year to date as of the company’s July earnings report. Latin American sales also indicate exceptional growth, coming in at a hefty 21% revenue increase since the start of the year.
These increases show that consumers do not plan to abandon the beverage giant, despite increasing inflation and other recession concerns. With a selection that includes Quaker Oats, Rice-a-Roni, Sabra hummus, and Aunt Jemima pancakes, alongside Frito Lay, Doritos, Cheetos, Cracker Jack, and Cap’n Crunch, PepsiCo offers something for every shopper. Lipton teas, Aquafina, and even packaged Starbucks drinks add even more to the beverage selection that includes Pepsi, Mountain Dew, and Gatorade. Pepsi this year attained status as a Dividend King; dividend increases over the last 50 years make it a strong option for those looking to buy and hold.
The benefits of membership shopping
Even as the pain at the pump recedes, Costco remains a savvy bet for investors. The wholesale retailer brings more to the table than just cheap rotisserie chickens, hot dogs, and fresh deli baked goods. Its Kirkland Signature store brand of products enjoys a reputation for quality, and the company offers a wide range from vacation packages and gift cards to tires and gas alongside everyday household items. Members save on goods with only a $60 annual fee ($120 for the top-tier membership), and the company earlier this year confirmed no plans as of yet to change that price.
The perception of quality gives Costco an edge competing against online and big-box retailers such as Amazon and Walmart, which have long proven the benefits of one-stop shopping. Costco shoppers continue to remain loyal, with the company announcing 10.7% increased sales for the six months prior to its May earnings report. Over the past five years, Costco consistently beat Walmart (and its warehouse retailer, Sam’s Club) in stock performance, growing portfolios by 210% versus Walmart’s 66% in the same period.
More than just handmade goods
Investors looking at Etsy likely seek a chance to find growth in uncertain market times. The marketplace boasted a robust 10% revenue growth year over year in its July earnings report, but increases in operating expenses failed to keep pace, resulting in a net decline in income. EBITDA still increased by 16.7% in the same period, indicating the company still has strong bones and plenty of room for growth.
Indeed, concerns about Etsy’s continued growth appear unfounded. While rampant speculation during the stay-at-home orders drove price-to-sales ratios upwards of 20, that value now rests closer to 6. This ratio indicates some may still undervalue the company, compared to a P/S ratios of 8 for Shopify, which previously traded at ratios as high as 40.
Speculation cooled, but Etsy maintains much of the gains it garnered during the early pandemic days. The July earnings report also indicated the Etsy marketplace gained approximately 6 million new buyers and boasted an increase of almost 3.5 million active buyers, compared to Ebay‘s loss of approximately 4 million active buyers in the same period.
Comparing these potential opportunities
The stability of PepsiCo gives investors a safer bet in a company with a storied history and no sign of slowing down. Over the past five years, throughout the onset of the pandemic and new supply chain economy, PepsiCo managed to grow its share value by over 55%, on par with the S&P 500 for that period.
Costco’s lack of status as a Dividend King may sway some toward PepsiCo, but the company’s stellar 210% stock price increase in the same five-year period may just woo some back. If growth potential catches your eye, Etsy soared during the early pandemic period and still commands share prices around 550% greater than its 2017 value, beating the S&P 500 by a factor of 10.
Whether you’re considering one, two, or all three of these potential investment opportunities in consumer staples, remember to set yourself up for success. Carefully vet each investment and the timeframe in which you hope to realize anticipated returns. While I might be buying these Nasdaq stocks until I’m blue in the face, we don’t want anyone to get egg on theirs for leaping before getting a good look at the fundamentals!
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Nicholas Robbins has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, Etsy, Shopify, and Walmart Inc. The Motley Fool recommends eBay and recommends the following options: long January 2023 $1,140 calls on Shopify, short January 2023 $1,160 calls on Shopify, and short October 2022 $50 calls on eBay. The Motley Fool has a disclosure policy.
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