Consumer Defensive: Top-Shelf Picks for a Cautious Spending Environment
As consumer spending slows, investors should focus on companies that enjoy strong brand intangible assets or sustainable cost advantages.
The consumer defensive sector trades at a median price/fair value of 1.01, although it is slightly less overvalued than our overall coverage universe, which trades at a median price/fair value of 1.03. Investment opportunities remain, but many of the stocks we consider the most undervalued are seeing severe foreign currency headwinds from the strong U.S. dollar (including top pick Nestle (NSRGY)), threats to their growth from slowing international consumer spending (which has also plagued Nestle), or are going through fundamental business changes (such as Procter & Gamble (PG)) that could continue to challenge these companies' revenue and earnings over the near term (albeit with the long run looking quite a bit rosier).
Adam Fleck does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.