With the stock market in the US seemingly moving up and down from one day to next (without much direction), it’s becoming clear that investors are worried about inflation.
That’s because inflation will hurt high-growth stocks, many of which are in the technology sector and had an amazing 2020.
Yet for long-term investors, it’s always worth being diversified in our portfolios. That means having exposure to other areas of growth besides technology.
In many instances, that means exposure to the US consumer market. With consumer spending making up over two-thirds of the country’s GDP, the US epitomises the power of the consumer.
With that, here are three absolutely solid consumer stocks that any long-term investor can think about adding to their portfolio.
Everyone should have heard of retailing giant Walmart Inc (NYSE: WMT) and the big-box stores that they popularised.
Despite the company coming under pressure from online retailing giant Amazon.com Inc (NASDAQ: AMZN), Walmart has continued to thrive.
That’s because the “Beast of Bentonville” has become known as the company that pulls in the most revenue of any company in the world.
In its first quarter of fiscal year 2022, Walmart saw total revenue of a huge US$138.3 billion – which was up 2.7% year-on-year.
Meanwhile its operating income was US$6.9 billion during the quarter, up an impressive 32.3% year-on-year.
Having introduced a new subscription service, similar to Amazon Prime, called “Walmart+”, the company is looking to generate that recurring revenue which can help support its expansion and better serve its customers.
Finally, Walmart is also a Dividend Aristocrat having raised its dividend for 48 consecutive years and its shares currently yield 1.6%.
Although Target Corporation (NYSE: TGT) is probably less well known globally to investors, the company is a mainstay of the US market.
That’s because Target is seen as an “everything” store where consumers can get groceries to picking up reasonable yet well-made own-label clothing.
Unsurprisingly, that advantage has shone through during the pandemic. The company is set to report its latest earnings before the market open today (Wednesday).
Based on its latest numbers, investor shouldn’t be surprised if the company blows away expectations again. In 2020, Target saw sales growth of US$15 billion, more than the previous 11 years combined.
Target also has a formidable line-up of its own brands, with 10 own-label names that pulled in over US$1 billion in sales in 2020.
With an efficient online and delivery operation, as well as curb-side pickup, Target is set to continue to thrive well after the pandemic.
3. Home Depot
Finally, there’s the housing and do-it-yourself (DIY) home improvement retailer Home Depot Inc (NYSE: HD).
Home Depot has been a consistent and reliable performer over the past decade. The company has prided itself on its impeccable shopper experience combined with an unrivalled range of home improvement goods.
Together, that has been a winning formula as the US went into lockdown during Covid-19. That’s because people in lockdown wanted to take on new projects to improve their homes.
Home Depot’s latest earnings are testament to a trend (the continued housing and DIY boom) that’s unlikely to dissipate any time soon.
In its first quarter of fiscal 2021, Home Depot saw sales of US$37.5 billion which was up 32.7% year-on-year from the same period a year ago.
Meanwhile, earnings per share (EPS) for the quarter was US$3.86, which was up an amazing 85.6% year-on-year.
To top it off for investors, Home Depot shares yield 2.1% and it has grown its dividend at a compound annual growth rate (CAGR) of over 20% during the past decade.
Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.