Consumer Stocks Offer Pockets of Investor Value

Tobacco stocks offer investors good growth opportunities, say Morningstar equity analysts, although other consumer stocks look expensive

Erin Lash, CFA 4 January, 2019 | 12:25PM
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Investors Should Feast on Moaty Consumer Defensive Firms

The Morningstar Global Consumer Defensive Index held up comparably well in the fourth quarter of 2018, sliding 7% through December 20 versus a 14% drop for the broader market. Still, consumer defensive shares are off 10% for the year, in line with the overall market amid concerns about the competitive landscape and the ability of firms to offset higher commodity and transportation costs by increasing prices.

We don't believe the consumer defensive sector offers much value in the aggregate, with the median stock we cover trading at a modest 7% discount to our valuation. Nevertheless, we see comparably more buying opportunities in the sector than in most, with 9% of consumer defensive shares trading in five-star territory.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Anheuser-Busch InBev SA/NV47.68 EUR-0.49Rating
British American Tobacco PLC2,583.50 GBX-0.60Rating
General Mills Inc61.52 USD-1.03Rating

About Author

Erin Lash, CFA  Erin Lash, CFA, is a senior stock analyst with Morningstar.