With the third quarter of what has proven to be a remarkable 2020 coming to a close, many of the firms we cover across Wall Street are already looking to the fourth quarter of the year and to 2021 for what should be an improving economy as we emerge from the pandemic lockdowns and precautions. One thing is for sure. The rally everybody was looking to arrive in the second half of the year already may have come and gone.

Despite the sell-off on Monday, the S&P 500 has made a stunning reversal off the March 23 lows, recouping all the losses and printing all-time highs, with the Nasdaq composite index lifted by the strength of the mega-cap tech giants.
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The Jefferies analysts were tasked with providing their 50 top high-conviction ideas for the second half of 2020, and they noted this in the research report:

We present the US Research team’s current top ideas, spanning all sectors under coverage. With representation from nearly every publishing analyst, we highlight 50 stocks we find particularly attractive. These are our highest conviction ideas, regardless of theme or macro backdrop, and include our Franchise Picks.

We screened the consumer staple picks, as the sector offers nervous investors a degree of safety, and found four solid ideas for long-term growth investors. While all four stocks are rated Buy at Jefferies, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Casey’s General Stores

This hot consumer staples stock resides on the Jefferies Franchise Picks list. Casey’s General Stores Inc. (NASDAQ: CASY) and its subsidiaries operate convenience stores under the name Casey’s General Store in approximately 10 Midwestern states, including Iowa, Missouri and Illinois.

The company operates approximately 1,930 such stores, as well as two distribution centers through which it supplies grocery and general merchandise items to its stores. Its general store typically carries over 3,000 food and nonfood items. The stores sell regional brands of dairy and bakery products, and approximately 90% of the stores offer beer. Its nonfood items include tobacco products, health and beauty aids, school supplies, housewares, pet supplies and automotive products.

Jefferies has remained bullish for some time and had this to say:

Aside from the appeal of a consolidator in the highly fragmented c-store segment that is seeing structural tailwinds to fuel margins, we continue to like the company due to its superior food service offering and self help initiatives that should help deliver solid market share gains in its small town footprint and robust EBITDA growth long term.

Shareholders receive just a 0.75% dividend. The Jefferies price objective for the shares is $225, and the Wall Street consensus price target is much lower at $193.56. Casey’s General Stores stock closed trading on Monday at $171.16.

Conagra Brands

This is a solid stock for conservative investors looking for growth and income. Conagra Brands Inc. (NYSE: CAG) operates as a food company in North America. Its brands include Marie Callender’s, Reddi-whip, Hunt’s, Healthy Choice, Slim Jim, Orville Redenbacher’s, Alexia, Blake’s, Duke’s, Frontera, Banquet and Chef Boyardee.

The company’s Grocery & Snacks segment primarily offers shelf-stable food products in various retail channels in the United States. The Refrigerated & Frozen segment provides temperature-controlled food products in various retail channels in the United States. The International reporting segment offers food products in various temperature states in retail and foodservice channels outside of the United States.

The Foodservice segment offers food products, including meals, entrees, sauces and various custom-manufactured culinary products packaged for sale, to restaurants and other foodservice establishments in the United States.

The analysts noted this:

As one of North America’s leading branded food companies, our Buy rating is predicated on advantaged portfolio/channel/geographic positioning amid an elevated food-at-home consumption backdrop, margin expansion potential driven by transactional synergies and mix margin positive innovation, and attractive valuation relative to the food peer group. Net-net, we believe positive consensus profit and earnings revisions should continue over the next 12-18 months. The recent pullback in shares presents a good buying opportunity for a core defensive food name.

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Conagra Brands stock investors receive a 2.43% dividend. Jefferies has a $41 price target, while the consensus target is $38.06 and Monday’s closing share price was $35.04.

NuSkin

This off-the-radar stock makes sense for conservative investors as well. Nu Skin Enterprises Inc. (NYSE: NUS) develops and distributes anti-aging personal care products and nutritional supplements under the Nu Skin and Pharmanex category brands worldwide. It provides skincare systems, including ageLOC Me customized skincare systems, ageLOC Spa systems and ageLOC LumiSpa skin treatment and cleansing devices, and it provides Epoch products, as well as a range of other cosmetic and personal care products.

The company also offers ageLOC Youth nutritional supplements, ageLOC TR90 weight management and body shaping systems, and LifePak nutritional supplements, as well as other anti-aging nutritional solutions and weight management products. In addition, it is involved in the research and product development of skincare products and nutritional supplements.

Further, NuSkin operates walk-in centers and pick-up locations, and it has retail stores and service centers in China. The company sells its products directly, as well as through distributors and websites, and the analysts noted this:

The business is pivoting from multi-level-marketing to a direct-to-consumer and affiliate model driven by customer counts, shoppable social and product innovation which should lead to re-rating. Major product launch coming in Q4 (LumiSpa Boost); consensus under modeling potential uptake which should lead to upside in estimates. China (30% of sales) recovery underway with easy comps on a 1-and-2 year basis is another source of upside to estimates.

Jefferies has set a $57 price target. The consensus target is $55.57, and the last NuSkin Enterprises stock trade on Monday was reported at $52.32.

Procter & Gamble

The company offers a very dependable dividend, which was raised to $0.79 this spring. Procter & Gamble Co. (NYSE: PG) is one of the world’s largest consumer products companies. Its many brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn. Some of these are among the most valuable brands in the world.

The company sells its products through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores, high-frequency stores and pharmacies. The company has been very innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors years of steady growth and dividends.

The analysts noted this when discussing the consumer products giant:

While the macro remains volatile, Proctor & Gamble’s market share momentum is building across geographies/categories, the co.’s “productivity muscle” is enabling substantial investment, China (2nd largest market) is in recovery post challenging first quarter, and P&G should see sustainably higher demand from “mega trends” during/post the 2019 recession driving high EPS visibility (i.e., health/ wellness, work-from-home, shift to e-com, retailer focus on core SKUs).

Shareholders receive a 2.31% dividend. The $153 Jefferies price objective compares with the $139.01 consensus figure. Procter & Gamble stock was last seen trading at $136.71.

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These four consumer staples stocks make sense now, as we could be in for some rocky times as we start the fourth quarter. More importantly, after the big gains investors have seen this year, it makes sense to take some profits and reset with more conservative ideas.

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