Remember the Apple maps fiasco? It released a less than perfect app that sent the media into a frenzy and gave Google maps a real or perceived edge.
Then there was the Facebook IPO that the digerati cast as anathema to the company’s “brand” (though truthfully, I’ve always had trouble seeing a financial transaction as a “branding event”).
As an investor, it’s sometimes hard to figure out what all this means and where the money is, or where it’s going. Really, who knows?
But I know this: People get up every morning, they get dressed, they eat breakfast, they go to work, they take breaks, they go home, they go to sleep, and that every one of these activities is an economic event that positively impacts companies in the S&P Consumer Staples sector.
And how. So far this year, the Consumer Staples Select Sector SPDR ETF – which mimics the index – has been on a tear with a year-to-date and one year performance of 14.6 per cent and 20.3 per cent respectively. That’s a lot of alpha over the broad S&P 500 ETF’s performance of 10.6 per cent year-to-date and 13.8 per cent over the past year.
I don’t think the run is over.
Some of the larger names in the sector are so familiar that their ubiquity obscures just how much cash they are throwing off and what great investments they are. These include names like Clorox, Walgreen’s and PepsiCo. What companies and others like them demonstrate is how the combination of growing sales, earnings and dividends create compelling total returns.
It’s little surprise then that for our Dividend Buster’s portfolio, for which I select the investments along with others at my firm, fully 25 per cent of the names are in the consumer staples sector. For this portfolio we’ve added one other element: share buybacks.
Four consumer staples names from this portfolio worth looking at that have been growing their sales, earnings, dividends and have share buybacks are McDonald’s, TJX Companies, Darden Restaurants and General Mills.
Looking at a 10-year chart for any of these companies is at once amazing, compelling and perhaps a little disheartening. You might think you’ve missed the boat. I don’t think so; every day the sun rises offers these companies a chance to fatten their coffers and yours.
Oliver Pursche is Co-Portfolio Manager for the GMG Defensive Beta Fund, and a Founding Partner of Montebello Partners, llc. Additionally, Mr. Pursche serves as President of Gary Goldberg Financial Services, where he helps oversee the investment portfolio of over 2000 clients with over $$500-million in assets.