The Consumer Staples sector is home to some of the ASX’s highest quality, blue-chip companies. The sector is broken down into three industry groups: Food & Staples Retailing; Food, Beverage & Tobacco; and Household & Personal Products.
Keen followers of investment great Warren Buffett will note his penchant for buying companies that sell FMCG (Fast Moving Consumer Goods) and have brand name strength. The Consumer Staples sector is home to many brands and FMCG companies.
1) Contrarian – While the rest of the market appears to be selling Coca-Cola Amatil Ltd (ASX: CCL), for investors prepared to take a contrarian view of the beverage bottler and distributor now may turn out to be an opportune time to add this quality stock to a long-term portfolio.
3) Growth – The recent battle for acquiring Warrnambool Cheese & Butter highlighted to investors the inherent value in peer Bega Cheese Ltd (ASX: BGA). Bega’s share price has been significantly re-rated as a result; this re-rating not only reflects the strategic appeal of its assets but also reflects the future growth potential, particularly in Asia, of its dairy products.
4) Speculative – Pental Ltd (ASX: PTL) has managed to survive what has been a torrid few years for the manufacturer of household brands including White King, Pears, Softly and Jiffy. While Pental continues to face a competitive and difficult operating environment, there could be significant upside in the stock if a turnaround in the company’s fortunes can be achieved.
5) Value – Treasury Wine Estates Ltd’s (ASX: TWE) share price has fallen 35.5% in the past 12 months and is currently at $3.69. Treasury boasts an impressive stable of wine brands and with the share price now reflecting the problematic North American division, there could be value at current levels.
There are many ways to put together a diversified portfolio, perhaps the most important aspect of stock selection is to remain within your ‘circle of competence’. If you have a good understanding of Consumer Staple businesses, while you may not completely want to limit your portfolio to this one sector, there are a number of different approaches you can use – such as value and growth – to create a diversified portfolio from within the sector.