Last Friday, all the major indexes hit all-time closing highs, and while that is awesome when you check your brokerage or 401(k) statement, the reality is we are set up for a sell-off. While it may not come in December, it is coming. The perennial optimists on Wall Street remain just that, but many of the top firms we cover are urging caution. While equities remain the best way to stay invested, it may be time to shift to safer sectors.
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A recent Jefferies report looks at the consumer staples sector. It seems that nearly 60% of staples companies the analysts screened include a cash flow or capital efficiency metric for executive compensation, aligning management to long-term shareholder value creation. In a world where many C-Suite executives put their interest first, this is huge for investors.

While Jefferies remains very selective in the sector, seven top companies stand out. Here we chose five that always remain popular with consumers and make sense for growth investors looking to shift from momentum or crowded growth stocks to safer positions.

While all 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.

Campbell Soup

While very well known for its namesake products, this company brings a lot more to the table. Campbell Soup Co. (NYSE: CPB) engages in the manufacture and marketing of food and beverage products.

The Meals & Beverages segment engages in the retail and foodservice businesses in the United States and Canada. It provides Campbell’s condensed and ready-to-serve soups; Swanson broth and stocks; Pacific Foods broth, soups and nondairy beverages; Prego pasta sauces; Pace Mexican sauces; Campbell’s gravies, pasta, beans and dinner sauces; Swanson canned poultry; Plum baby food and snacks; V8 juices and beverages; and Campbell’s tomato juice.

The Snacks segment retails Pepperidge Farm cookies, crackers, fresh bakery and frozen products in the United States; Milano cookies and Goldfish crackers; and Snyder’s of Hanover pretzels; Lance sandwich crackers; Cape Cod and Kettle Brand potato chips; Late July snacks; Snack Factory Pretzel Crisps; Pop Secret popcorn; Emerald nuts; and other snacking products in the United States and Canada.

Investors enjoy a solid 2.89% dividend. Jefferies has a $59 price objective for the stock, which compares to the lower $53.33 Wall Street consensus target and Friday’s closing price for Campbell Soup of $48.50 a share.

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.
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The analysts noted this earlier this fall:

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.

Investors receive a 3.10% dividend. The Jefferies price objective is $41, and the consensus target price is $37.74. Congra Brands stock closed at $35.49 on Friday.

Constellation Brands

If there is any company with products that stay in style it is this one, and it has only 7% foreign sales. Constellation Brands Inc. (NYSE: STZ) is a leading global producer and marketer of beverage alcohol. Its wide-ranging portfolio spans wine, spirits and imported beer.

The company is one the world’s largest wine companies overall and is the largest global premium wine company. Key brands include Robert Mondavi, Clos du Bois, Blackstone, Arbor Mist, Black Velvet and SVEDKA vodka. It also owns 100% of the rights to brew, market and sell Modelo’s Mexican beers in the United States.

The company made a gigantic $3.8 billion investment in cannabis company Canopy Growth last year to increase its holdings in the company. The record investment reflects a world in which marijuana has become ubiquitous as its counterculture stigma fades and more states legalize use.

Investors in Constellation Brands stock receive a 1.63% dividend. The lofty $238 Jefferies price target is well above the $218.68 consensus target. Shares were last seen trading at $213.79.

Mondelez

This consumer sector giant also makes good sense for conservative accounts. Mondelez International Inc. (NASDAQ: MDLZ) manufactures and markets snack food and beverage products worldwide. It offers biscuits, including cookies, crackers and salted snacks; chocolates, and gums and candies; powdered beverages and coffee; and cheese and grocery products.
Its primary brand portfolio includes LU, Nabisco and Oreo biscuits; Cadbury, Cadbury Dairy Milk and Milka chocolates; Trident gum; Jacobs Kaffee; and Tang powdered beverages.

Mondelez sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets through direct store delivery, company-owned and satellite warehouses, distribution centers and other facilities, as well as through independent sales offices and agents.
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Shareholders receive a 2.13% dividend. The Jefferies price target is $64. The posted consensus target is $64 as well, and Mondelez International stock closed Friday at $59.03.

Procter & Gamble

The company offers a very dependable dividend, which was raised to $0.79 back in the 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 earlier this fall:

While the macro remains volatile, Procter & 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 2.30% dividend. Jefferies has set a $166 price target. The consensus target is $150.31, and Procter & Gamble stock closed most recently at $137.47.

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The prospects for 2021 are indeed very promising, with COVID-19 vaccines coming, improving travel and spending, plus economic growth as the Federal Reserve continues to keep rates low. However, the CNN Fear & Greed Index is highlighting an extreme in optimism that will be hard to top in coming months. When investors are this optimistic, it usually portends a sizable downturn.

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