Institutions Investing in Overlooked Consumer Staples

Many consumer staples stocks have been underperforming in the past year due to tough comparisons and changing consumer habits. However, these stocks are now trading at significant discounts to their historical prices and offer high yields and value. While these stocks may not have high growth prospects, they provide steady business performance, improving profitability, dividend coverage, and distribution growth that surpasses the broader market.

Despite the potential for lower share prices or extended periods of stagnation, there is a catalyst for upward movement in stocks like Medifast, Archer-Daniels-Midland, and Kraft Heinz. These companies have attracted institutional investors and analysts expect them to move higher. Assuming these businesses continue to perform well, their share prices should appreciate over time, while also providing market-beating yields.

Medifast Hurt By Diet Pill Market Outlook

Medifast, a weight loss supplement and management company, has been affected by the emergence of new weight loss drugs in the market. Although its business has declined compared to last year’s record levels, it is now normalizing above 2019 levels. This means that the stock’s 8.5% yield is backed by robust dividend coverage. The company’s payout ratio is about 50% of the full-year outlook, supported by its strong balance sheet and increased cash position. With no interest-bearing debt, Medifast is well-positioned to continue raising its dividend.

Archer-Daniels-Midland: Serving the Consumer Food Industry

Archer-Daniels-Midland operates as an intermediary between farmers and consumer food manufacturers. The company handles and processes agricultural commodities to provide usable products for the food industry. With a price-to-earnings ratio of around 11X and a yield of 2.35%, the stock offers value compared to its sector and the broader market. Institutional investors own approximately 78% of the stock and have been consistently buying it over the past four quarters. Analysts also anticipate the stock to move higher by more than 25%, indicating a potential bottom in the near future.

Kraft Heinz At Rock Bottom

Shares of Kraft Heinz have experienced a correction within a trading range this year and recently hit the bottom of the range in the third quarter. The stock’s rebound can be attributed to increased institutional activity, with institutions consistently buying the stock for seven quarters in a row. Approximately 75% of the company is owned by institutions, including well-known investors like Warren Buffet and Berkshire Hathaway. Analysts have revised their price targets for Kraft Heinz this year but still anticipate a 22% upward movement, signaling a potential market bottom. The upcoming Q3 earnings report could serve as a catalyst for further momentum.

Companies in This Article:

Company Current Price Price Change Dividend Yield P/E Ratio Consensus Rating Consensus Price Target
Medifast (MED) $73.42 -1.3% 8.99% 6.06 Hold $80.00
Archer-Daniels-Midland (ADM) $73.46 -0.5% 2.45% 9.81 Moderate Buy $97.50
Kraft Heinz (KHC) $33.28 +0.5% 4.81% 13.00 Hold $41.73

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