QVI Stock Picks Review | Winter 2024 | #3

Quality Value Investing's consumer staples sector updates on KO, WMT, WMK, TGT, KR, and COST

Photo by Bram Naus on Unsplash

Summary:

• In this updated coverage, Quality Value Investing (QVI) reviews its consumer staples sector stock picks: Coca-Cola, Walmart, Weis Markets, Target, Kroger, and Costco Wholesale.

• The post includes updates to QVI’s checklist research and analysis of each company’s current wealth and the stock price’s present value.

• Any changes in my view (buy, hold, or sell) are reflected in the QVI Concentrated and Expanded Stock Picks Real-Time Performance Trackers.

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Uncovering the winning stocks of enduring enterprises

When referencing this report, premium (paying) subscribers can access their Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets. Unless noted, all data presented is sourced from Seeking Alpha Premium as of the market close on January 26, 2024, and intended for illustration only.

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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 covers QVI’s consumer staples sector picks: The Coca-Cola Company (NYSE: KO), Walmart, Inc. (NYSE: WMT), Weis Markets, Inc. (NYSE: WMK), Target Corporation (NYSE: TGT), The Kroger Co. (NYSE: KR), and Costco Wholesale Corporation (NASDAQ: COST).

Company Current Wealth

To uncover the current wealth of each company, QVI defines the value proposition, measures returns on management, and assesses enterprise downside risks.

Value Proposition

QVI’s value proposition section defines the competitive advantages of a company’s products or services to its customers compared to the industry, including the stock’s historical performance vs. the sector and market.

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 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, the originator of the supermarket model, leverages its experience and scale to outperform direct competitors, the non-cyclical consumer sector, and the broader stock market.

Costco Wholesale leverages its brand name by selling inventory at or near cost. However, its membership fees, willingly paid by its loyal members, drive its predictable net profit margin.

Performance vs. Sector and Market

The chart below illustrates each pick’s performance against the Consumer Staples Select Sector SPDR® Fund ETF (NYSE: XLP) +273% and the SPDR®S&P 500 ETF Trust (NYSE: SPY) +450%, since October 4, 2010, when QVI’s first sector holding, KO, was added to the Concentrated Stock Picks.

Only COST +1,370% and KR +454% have outperformed the sector and market during the 13+ years coverage period. At the same time, WMT +312% and TGT 282% beat the sector, whereas KO +203% and WMK +130% underperformed the sector and market in total returns during the coverage timeframe.

Of note, TGT +4,328 basis points [bps], WMT +4,106, COST +3,434, and KR +2,349 bps have achieved alpha since their inception dates in the QVI Real-Time Stock Picks. In contrast, KO -13,360 bps and WMK -693 have underperformed the S&P 500 in total return since being added as defensive stocks.

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.