QVI Stock Picks Review | Q2 2024 | #3
Quality Value Investing's consumer staples sector updates for $KO, $WMT, $WMK, $TGT, $KR, and $COST
Summary:
Quality Value Investing (QVI) reviews its six consumer staples sector picks’ performance, current wealth, and present value.
The report covers The Coca-Cola Company, Walmart, Weis Markets, Target, The Kroger Co., and Costco Wholesale.
The QVI Concentrated and Expanded Stock Picks Real-Time Performance Trackers reflect changes in my views (buy, hold, or sell) from this updated sector analysis.
When referencing this research report, access your Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets and Research Report Format Guide. Unless noted, all data presented is sourced from Seeking Alpha Premium as of the market close on May 13, 2024, and intended for illustration only.
In this series, Quality Value Investing reviews the QVI Real-Time Stock Picks by sector to update each holding’s performance, current wealth, and present value.
Today’s post reviews QVI’s six consumer staples sector holdings: The Coca-Cola Company (KO), Walmart (WMT), Weis Markets (WMK), Target (TGT), The Kroger Co. (KR), and Costco Wholesale (COST).
Company Current Wealth
Value Proposition
Economic Moat
Morningstar assigns wide economic moat ratings to KO, WMT, and COST, while WMK, TGT, and KR have competitive moat ratings of none.
Value Proposition Elevator Pitches
Coca-Cola is a legendary global powerhouse with a ubiquitous brand name that likely isn't going anywhere except consumers' refrigerators, pantries, and cupholders.
Walmart, love it or hate it, is an enduring American institution.
Weis Markets processes its own milk and famous ice cream and supports local farmers. By utilizing its centrally-located distribution centers and transportation fleet, the company self-distributes approximately 67% of the products sold in its stores.
Target is the Millennial generation's favorite place to shop when offline. Of course, Target shoppers also buy online, albeit from their local store's inventory. Nevertheless, the Bullseye is a comfort zone for the rare millennial on-ground shopping spree.
Kroger originated the supermarket model and now leverages its experience and scale to outperform direct competitors, the non-cyclical consumer sector, and the broader stock market.
Costco Wholesale emanates its brand name by selling inventory at or near cost. However, its membership fees, willingly paid by its loyal members, drive its retail-level profit margin with predictability.
Returns on Management
Revenue Growth and Net Profit Margins
The chart below shows that Costco Wholesale and The Coca-Cola Company had double-digit three-year trailing revenue growth. Walmart, Target, Weis Markets, and The Kroger Co. each delivered mid-single-digit topline increases.
The consumer staples sector had a +2.45% median revenue growth for comparison.
Coca-Cola had desirable high double-digit median net profit margins in the three-year trailing period. In contrast, Target, Costco, Walmart, Weis Markets, and Kroger had single-digit margins typical of retailers.
The sector had a +5.00% median net profit margin.
Next, we’ll look at each company’s returns on management and enterprise downsize risks and each stock’s present value, including shareholder yields, valuation multiples, and share price downside risks, exclusive to Quality Value Investing’s premium (paying) subscribers. The post concludes with the updated views on each covered stock.
Disclosure: I/we have beneficial long positions in the common shares of KO and KR in our family portfolio. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this article.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in their own research or due diligence and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.
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