U.S. market indexes traded lower on Thursday morning after the Federal Reserve raised interest rates by half a point on Wednesday and retail sales in November fell more than expected.
The Dow Jones Industrial Average declined 2.06%, or 695 points, on Thursday, while the S&P 500 fell 2.21% and the Nasdaq Composite retreated 2.48%.
Having posted a 13.5% loss for the year so far, the consumer defensive sector was also down 0.82% for the day.
While volatility persists due to high inflation, rising interest rates, the war in Ukraine and continued supply chain disruptions, gurus are still finding value opportunities among consumer defensive companies as their products are always in demand regardless of economic conditions.
According to GuruFocus’ Hot Picks, a Premium feature based on 13F filings, the consumer defensive stocks most-bought by gurus during the third quarter included Philip Morris International Inc. (PM, Financial), Mondelez International Inc. (MDLZ, Financial), PepsiCo Inc. (PEP, Financial), The Estee Lauder Companies Inc. (EL, Financial) and Dollar General Corp. (DG, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Philip Morris International
Held by 20 gurus with a combined equity portfolio weight of 22.56%, nine buys and nine sells were recorded for Philip Morris (PM, Financial) in the third quarter.
The New York-based tobacco company, which has begun rolling out smoke-free products to replace cigarettes and cigars, has a $156.79 billion market cap; its shares were trading around $101 on Thursday with a price-earnings ratio of 18.03 and a price-sales ratio of 4.95.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
The GF Score of 77 out of 100, however, indicates the company is likely to have average performance going forward. While it received high ratings for profitability and momentum, its growth and financial strength ranks were more moderate and the GF Value was low.
Of the gurus invested in Philip Morris, First Eagle Investment (Trades, Portfolio) has the largest stake with 0.63% of its outstanding shares. Tom Russo (Trades, Portfolio), John Rogers (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, the T Rowe Price Equity Income Fund (Trades, Portfolio), the MS Global Franchise Portfolio (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also have large positions in the stock.
Mondelez International
Recording nine buys and eight sells for the third quarter, 21 gurus are invested in Mondelez International (MDLZ, Financial). The combined weight in their equity portfolios is 6.67%.
The confectioner headquartered in Deerfield, Illinois, which is known for its Cadbury, Milka, Toblerone and Sour Patch Kids candy products, as well as Oreo and Chips Ahoy cookies, has a market cap of $90.75 billion; its shares were trading around $66.45 on Thursday with a price-earnings ratio of 29.54, a price-book ratio of 3.41 and a price-sales ratio of 3.04.
According to the GF Value Line, the stock is fairly valued currently.
Further, the GF Score of 84 suggests the company has good outperformance potential, driven by high ranks for profitability and momentum and middling marks for growth, financial strength and GF Value.
With a 0.25% stake, Ray Dalio (Trades, Portfolio)’s Bridgewater Associates is Mondelez’s largest guru shareholder. Other top guru investors include Simons’ firm, Elfun Trusts (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Sarah Ketterer (Trades, Portfolio) and Warren Buffett (Trades, Portfolio).
PepsiCo
PepsiCo (PEP, Financial), which recorded eight buys and 16 sells for the third quarter, is held by 26 gurus with a combined equity portfolio weight of 27.61%.
The Purchase, New York-based company, which produces a variety of popular soft drinks and snacks like Lays potato chips, Doritos and Tostitos, has a $247.63 billion market cap; its shares were trading around $179.60 on Thursday with a price-earnings ratio of 25.71, a price-book ratio of 13.05 and a price-sales ratio of 3.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The GF Score is also solid at 83, raking in high marks for profitability and growth as well as middling ranks for momentum, financial strength and GF Value. As such, PepsiCo has good future outperformance potential.
Dalio’s firm has the largest stake in PepsiCo with 0.29% of its outstanding shares. Yacktman Asset Management (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Simons’ firm and several other gurus also have notable positions in the stock.
Estee Lauder Companies
With seven buys and four sells for the quarter, Estee Lauder (EL, Financial) is held by 12 gurus. They have a combined equity portfolio weight of 4.87% in the stock.
The cosmetics company headquartered in New York, which owns well-known beauty brands like Aveda, Bobbi Brown, Clinique, Mac and Too Faced, has a market cap of $85.10 billion; its shares were trading around $238.93 on Thursday with a price-earnings ratio of 39.82, a price-book ratio of 15.44 and a price-sales ratio of 5.02.
The GF Value Line suggests the stock is modestly undervalued currently.
The company also has good outperformance potential based on its GF Score of 89. While Estee Lauder got high ratings for profitability and growth, its financial strength, GF Value and momentum ranks were more moderate.
Of the gurus invested in Estee Lauder, Baillie Gifford (Trades, Portfolio) has the largest stake with 0.75% of its outstanding shares. Spiros Segalas (Trades, Portfolio), Dalio’s firm, Cohen, Simons’ firm, the MS Global Franchise Portfolio (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Gabelli are among its other guru shareholders.
Dollar General
Dollar General (DG, Financial), which is held by 13 gurus, saw seven buys and five sells for the three-month period. Their combined equity portfolio weight is 9.18%.
The Goodlettsville, Tennessee-based company, which operates a chain of discount retail stores, has a $55.09 billion market cap; its shares were trading around $246.21 on Thursday with a price-earnings ratio of 23.95, a price-book ratio of 9.04 and a price-sales ratio of 1.54.
According to the GF Value Line, the stock is fairly valued currently.
The company has high outperformance potential on the back of a GF Score of 92. While Dollar General got solid ratings for profitability and growth, its financial strength, GF Value and momentum ranks were more moderate.
With a 1.19% stake, Barrow, Hanley, Mewhinney & Strauss is the company’s largest guru shareholder. Other top guru investors include Andreas Halvorsen (Trades, Portfolio), Dalio’s firm, Tom Gayner (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Julian Robertson (Trades, Portfolio)’s Tiger Management, PRIMECAP Management (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio).
Other popular picks
Additional stocks that were popular with gurus during the third quarter included Anheuser-Busch InBev SA/NV (BUD, Financial), Kimberly-Clark Corp. (KMB, Financial), Walmart Inc. (WMT, Financial), Helen of Troy Ltd. (HELE, Financial) and Unilever PLC (UL, Financial).
