The consumer defensive sector is generally a stable segment of the market, due to the fact that demands for these products hardly fluctuate, even during hard times.
Though these stocks are unlikely to present rapid growth opportunities, the advantage to having them in a portfolio is slow and steady growth. Because they are often seen as “boring” stocks, low prices present good buying opportunities in the sector.
According to results from the All-In-One-Screener, the following five consumer defensive stocks are trading near their 52-week lows, and are the most widely held among the gurus.
Colgate-Palmolive (CL, Financial)
Sixteen gurus currently hold positions in Colgate-Palmolive, with Jim Simons (Trades, Portfolio) as the largest shareholder with 1.41% of shares outstanding. The stock price declined marginally by 2% over the past year and is 6.36% above its 52-week low.
Colgate-Palmolive produces consumer products in four segments: oral care, personal care, home care, and pet nutrition. The current P/E ratio is 26.22 and the P/S ratio is 3.6. GuruFocus rates the company’s business predictability as 3.5 out of 5 stars, as revenue grew by 5.5% and EBITDA by 3.7% over the past five years.
As a large stalwart company, Colgate-Palmolive’s EBITDA per share has risen steadily, albeit slowly, over the years. In 2014, EBITDA per share was $4.44, up from $4.38 the year before.
The current dividend yield is 2.19%, and the payout ratio is 57%.
Avon Products (AVP, Financial)
Fifteen gurus hold stakes in Avon Products as of Q1. Donald Yacktman (Trades, Portfolio), the Yacktman Fund (Trades, Portfolio), and the Yacktman Focused Fund (Trades, Portfolio) are the three largest shareholders; the portfolios collectively own 15.15% of shares outstanding.
The stock declined 54% over the past year, and is currently 6.62% above its 52-week low. Avon is a direct seller of beauty, fashion, and home related products. The company has been struggling over the past three years and has not posted a profit since 2012. Net loss in 2014 was $389 million compared to $56 million the year before.
Avon’s dividend yield is 3.54%, which is close to the two-year high. However, the payout ratio is a high 140% due to lack of earnings.
Of 15 gurus who hold stakes in Diageo, James Barrow (Trades, Portfolio) is the largest shareholder with 0.73% of shares outstanding. Diageo produces and sells beverage alcohol with brands in spirits, beer, and wine.
Over the last year, the stock declined 4% and now trades at 10.73% above the 52-week low. The current P/E ratio is 21.54 and the P/S ratio is 4.72. The business predictability is rated as 3.5 out of 5 stars, with revenue growth rate of 2.8% and EBITDA growth of 5.6% over the past five years.
In 2014, net income was $3,804 million, a slight decrease from $3,847 million the year before.
The DCF calculator estimates Diageo’s fair value is $82.33, while the stock currently trades at $120.90. The resulting margin of safety is -47%.
Apollo Education Group (APOL, Financial)
Thirteen gurus hold positions in Apollo Education; Larry Robbins (Trades, Portfolio) is the largest shareholder with 5.01% of the company’s shares outstanding.
Apollo offers educational programs online and on-campus, at the undergraduate, graduate, and doctoral levels. One of its most notable platforms is the University of Phoenix. The stock price declined 47% over the past year and now trades 2.06% above its 52-week low. Apollo Education’s P/E ratio is 19.11 and the P/S ratio is 0.65.
Net income has been decreasing each year since 2011, recording at $209 million in 2014.
Another cautionary sign is that the operating margin has been in long-term decline, decreasing 16% over the past five years. In 2014, the margin was 11.21%.
DeVry Education Group (DV, Financial)
Twelve gurus currently own positions in for-profit education company DeVry. As of the first quarter, Charles de Vaulx (Trades, Portfolio) is the largest shareholder with 8.2% of shares outstanding.
DeVry’s stock price declined 23% over the past year, and now trades at 11.26% higher than its 52-week low. The stock closed at $33.36 on June 24; the current P/E ratio is 14.75 and the P/S ratio is 1.13.
Over the past five years, revenue grew by 6.7%, but EBITDA declined 5% over the same time period. DeVry reported EBITDA per share of $4.21 last year, a marginal increase from $4.05 in 2013.
The current dividend yield is 1.08%. The payout ratio is just 16%, which indicates room to grow the dividend in the future.
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