What are we looking for?
The day has finally arrived.
And on Nov. 9, the United States will have a new president-elect, and many sectors could either benefit or suffer from this election over the next few years.
Nobody knows for sure who will be elected, and nobody knows how much of an impact it could have on sectors such as energy, health care or financials.
This week, we wanted to filter stocks in a defensive industry: retail grocers/pharmacies and food distributors.
Whether Hillary Clinton or Donald Trump wins the White House, people will certainly continue to go to the grocery store and to the drugstore.
We have isolated the food and drug retailing stocks from our U.S. universe with seven different criteria to cover economic performance, growth and volatility – as follows:
- A minimum market capitalization of $1-billion (U.S.);
- Economic performance index, or EPI (return on capital divided by cost of capital). An EPI ratio of 1.0 or more indicates a company’s capacity to create wealth for its shareholders (a higher EPI displays a greater rate of wealth creation);
- Return on capital;
- One-year sales growth;
- Beta. A stock with a beta greater than one is considered more volatile than the market – less than one means less volatility;
- Dividend yield;
- One-year and five-year average annual dividend growth rates.
More about StockPointer
StockPointer is a fundamental analysis tool based on an EVA (economic value added) model to quickly and easily identify investment opportunities.
In addition to providing detailed reports on more than 7,500 companies (Canadian and U.S. stocks and American depositary receipts), StockPointer also allows investors to create personalized filters and build custom portfolios.
What did we find?
The defensiveness of the industry is obvious when looking at the beta column.
Even though we did not ask for a maximum beta, almost all companies, except Walgreens Boots Alliance, are considered less volatile than the S&P 500 with betas well below 1.0.
Wal-Mart is by far the largest company of the group, and the best economic performer with an EPI of 2.1. It also offers the highest dividend yield and the lowest beta.
For investors who prefer companies with growth profile attributes, CVS Health and Walgreens Boots Alliance could be good candidates.
CVS offers a good yield and the best dividend growth rates of the group.
Walgreens Boots only started trading in January, 2015, but has already raised its dividend twice.
Both companies have generated double-digit revenue growth over the past year.
Investors are advised to do additional research prior to investing in any of the companies mentioned.
Jean-Didier Lapointe is a financial analyst for StockPointer at Inovestor Inc.
Select U.S.-listed food and drug retail stocks
|Company||Ticker||Market cap ($Bil.)||EPI||R/C||1Y Sales Grwth||Beta||Div. Yield (%)||1Y Avg. Ann. Div. Grwth Rate||5Y Avg. Ann. Div. Grwth Rate|
|Wal-Mart Stores Inc||WMT-N||214.0||2.1||12.40%||-0.60%||0.21||2.90%||2.00%||5.90%|
|Caseys General Stores Inc||CASY-Q||4.4||1.9||13.10%||-6.40%||0.48||0.85%||9.00%||9.00%|
|Costco Wholesale Corp||COST-Q||62.4||1.8||13.50%||2.60%||0.57||1.26%||12.50%||12.60%|
|Sprouts Farmers Market||SFM-Q||3.1||1.5||11.30%||18.40%||0.67||n/a||n/a||n/a|
|Whole Foods Market Inc||WFM-Q||9.3||1.4||10.40%||1.90%||0.82||1.84%||7.70%||19.70%|
|CVS Health Corp||CVS-N||88.7||1.3||10.00%||14.40%||0.84||2.04%||22.90%||28.30%|
|Walgreens Boots Alliance Inc||WBA-Q||87.9||1.2||9.90%||13.60%||1.02||1.84%||11.80%||n/a|
|Performance Food Group Co||PFGC-N||2.5||1.0||8.00%||5.20%||n/a||n/a||n/a||n/a|