Consumer Products

Jefferies Has 4 High-Conviction Consumer Staples to Buy Now for Worried Investors

With the third quarter of what has proven to be a remarkable 2020 coming to a close, many of the firms we cover across Wall Street are already looking to the fourth quarter of the year and to 2021 for what should be an improving economy as we emerge from the pandemic lockdowns and precautions. One thing is for sure. The rally everybody was looking to arrive in the second half of the year already may have come and gone.

Despite the sell-off on Monday, the S&P 500 has made a stunning reversal off the March 23 lows, recouping all the losses and printing all-time highs, with the Nasdaq composite index lifted by the strength of the mega-cap tech giants.

The Jefferies analysts were tasked with providing their 50 top high-conviction ideas for the second half of 2020, and they noted this in the research report:

We present the US Research team’s current top ideas, spanning all sectors under coverage. With representation from nearly every publishing analyst, we highlight 50 stocks we find particularly attractive. These are our highest conviction ideas, regardless of theme or macro backdrop, and include our Franchise Picks.

We screened the consumer staple picks, as the sector offers nervous investors a degree of safety, and found four solid ideas for long-term growth investors. While all four stocks 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.

Casey’s General Stores

This hot consumer staples stock resides on the Jefferies Franchise Picks list. Casey’s General Stores Inc. (NASDAQ: CASY) and its subsidiaries operate convenience stores under the name Casey’s General Store in approximately 10 Midwestern states, including Iowa, Missouri and Illinois.

The company operates approximately 1,930 such stores, as well as two distribution centers through which it supplies grocery and general merchandise items to its stores. Its general store typically carries over 3,000 food and nonfood items. The stores sell regional brands of dairy and bakery products, and approximately 90% of the stores offer beer. Its nonfood items include tobacco products, health and beauty aids, school supplies, housewares, pet supplies and automotive products.

Jefferies has remained bullish for some time and had this to say:

Aside from the appeal of a consolidator in the highly fragmented c-store segment that is seeing structural tailwinds to fuel margins, we continue to like the company due to its superior food service offering and self help initiatives that should help deliver solid market share gains in its small town footprint and robust EBITDA growth long term.

Shareholders receive just a 0.75% dividend. The Jefferies price objective for the shares is $225, and the Wall Street consensus price target is much lower at $193.56. Casey’s General Stores stock closed trading on Monday at $171.16.

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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