Starting Over
It’s a new year, so let’s start over and build a model portfolio.
Let’s start with the consumer defensive sector. This group has much fewer issues with economic sensitivity. It is also the group I know the best. I spent two years as an auditor for the old Beatrice Foods in 1980. And then in 1984 I started as the consumer products analyst at the old Interfirst Investment Management.
Right now my “leader in the clubhouse” is Tyson Foods - TSN, but I want to hold a fair “competition” to find a better idea. There are about 100 -150 stocks in this sector, depending on where you draw the lines.
Let’s start with some big cap names, but then quickly get to some smaller cap ideas. We will follow the same approach as last time, very methodically comparing stocks until we find the best one.
Here is the first group, with markets caps over $10 billion:
Colgate Palmolive - CL - 50%+ in developing markets
Pepsico - PEP - Mountain Dew (insert banjo music here) and chips
Diageo - DEO - hard liquor, we may need it
Sysco - SYY - distributor to restaurants
Archer Daniels Midland - ADM - grain milling
Haleon - HLN - the British spinoff of Glaxo-Smithkline
Danone - DANOY - French based dairy and water
Estee Lauder - EL - cosmetics
Lamb Weston - LW - french fries
McCormack - MKC - spices and condiments
Campbell Soup - CPB - soup and snacks
Church & Dwight - CHD - baking soda and condoms, ain’t America great
Kimberly Clark - KMB - toilet paper and tissue
Kellanova - K - the new name almost disqualifies this idea
Keurig Dr. Pepper - KDP - coffee and soda pop
Obviously this is just a sample, I will circle back for the other big caps later. Starting with 40 big cap consumer stocks is too boring. I am not sure I will cover all the non- US stocks, my Dutch and Japanese is a little weak. I will cover the tobacco industry later as a special situation. Some folks throw Wal-Mart, Kroger, and other retailers, in this sector, but I will look at all retail separately.
There are a bunch of interesting smaller cap names. Here is another group to consider, roughly market caps of $5 billion to $500 million:
Post Holding - cereal (and also consider the new Kellogg - KLG)
Primo Water - PRMW - water for homes and offices
Fresh Del Monte Produce - FDP - the banana business, is the CIA still involved, stay turned
National Beverage - FIZZ - juices and energy drinks, best stock symbol?
TreeHouse Foods - pretzels and pickles
Reynolds Consumer - REYN - ironing boards, yes ironing boards, very boring
Chef’s Warehouse - CHEF- high end food distribution, top First Eagle holding
SunOpta - STKL - a strange collection of businesses
The Duckhorn Portfolio - NAPA - wine, a new Select Equity idea
B&G Foods - BGS - eat your vegetables, a 7% yield for you yield whores, you know who you are
There are 40+ other small stocks to consider.
Security analysis is a time management problem. There is too much information, and too little time. The job of the generalist is never done. You could spend a year analyzing just these 25 companies listed above.
The rough idea is to spend about an hour with each of these stocks, but pause and dig in when we find something interesting.
Let the journey begin again.