3 Big Brand Stocks to Buy in November
The value of a brand name is that it conveys quality, strength, and durability a consumer can count on. You know what you're getting every time you open a bottle, walk through a door, or pour out its contents. The biggest brand names also have a resiliency that can carry the company through tough times that every business invariably goes through.
We've asked three top Motley Fool contributors to search the universe of big brands and come up some names that offer the best opportunities for growth and returns that investors can put in their portfolios today. Here are the three biggest brandsthey believe are best positioned to reward investors in the coming years: Anheuser-Busch InBev (NYSE: BUD), CVS Health (NYSE: CVS), and Clorox (NYSE: CLX).
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Go for global growth
Keith Noonan(Anheuser-Busch InBev):The market is pulling back on Anheuser-Busch InBev, and that could mean November is a smart time to take a position in the world's largest beer distributor.Its stock price has fallen more than 5% following the release of its most recent quarterly results on Oct. 27 -- with disappointment stemming from revenue and earnings misses, a downward revenue forecast revision resulting from unit volume in Brazil, and expectations for ongoing pressures in China. The stock is also down more than 12% over the past month, but the completed acquisition of SABMiller points to benefits of scale that should have pronounced effects over the long term.
The merger has created a global beer powerhouse, with brands including AB-InBev's Budweiser, Becks, Corona, Stella Artois, and SABMiller's Pilsner Urquel, Carlton, Foster's, and Cascade now under the same corporate roof. The combined business stands as the fifth largest consumer-goods company by revenue and is No. 1 in terms of EBITDA, while guiding for the merger to result in a combined $2.45 billion in annual expense reductions.
The beer market is poised to remain highly competitive, but the new company looks to give AB-InBev strong positioning in the world's most growth-rich markets. Before the merger, SAB generated roughly two-thirds of its sales from its Asia and Africa segments, and the marketing, materials sourcing, and distribution benefits created by the acquisition present substantial opportunities in these markets.
AB-InBev stock also has an attractive returned income component, with the recent sell-offs pushing the company's dividend yield to roughly 4%.
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Poised for prosperity
Brian Feroldi (CVS Health): Baby boomers are starting to retire in huge numbers, which should be a great long-term tailwind for the pharmaceutical industry. However, instead of buying the drug manufacturers themselves, I think a smarter and lower-risk way to play the trend is by owning CVS Heath.
CVS is two businesses in one. You're probably more familiar with the company's nationwide chain of retail pharmacy stores, which continue to put up solid growth numbers. Customers flock to the company's stores to help them fill their prescriptions, and its ongoing buildout of in-store clinics, called MinuteClinics, should keep demand strong for decades to come.
CVS Health's pharmacy benefits management division also looks poised for prosperity. Think of this business as a middleman between providers of health insurance coverage -- employers, governments, unions -- and drug manufacturers. CVS uses its market expertise and huge buying power to negotiate steep discounts on drugs, which it then passes along to to its customers. The company charges a small fee for this service, which creates a win-win relationship. Perhaps it's no surprise to see that this business boasts customer retention rate north of 97%.
CVS has multiple growth avenues ahead of it, which should help drive revenue and profit growth for years to come. With shares trading for 13 times forward earnings and offering up a dividend yield of 2%, this is a great big brand stock to buy.
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Cleaning up with brand positioning
Rich Duprey (Clorox): When you think of Clorox,invariably you think about bleach, but the consumer-products giant has amassed an impressive portfolio of brands over the years that includes Brita water filters, Pine-Sol and Tilex cleaners, Kingsford charcoal, and Burt's Bees lip balm.
Even so, shares of Clorox are down 5% over the past year and 15% from their 52-week high, primarily as its fiscal fourth-quarter earnings in August fell 13% from last year, which were hurt by investments it made in the portfolio and its global footprint that puts it in more than 100 countries where currency exchange rates fell short against a strong U.S. dollar.
The discount the market is providing, however, gives investors an entry into its stock. They can take advantage of the consumer-products company's willingness to invest in its brands to position them for future growth. More than 80% of Clorox's sales are generated from brands that hold the No. 1 or No. 2 market share positions in their respective categories.
Although it's facing competitive pressures from Colgate-Palmolive (NYSE: CL), which has a similarly diversified, global brand portfolio, investors can find solace in the fact that it also comes up against the same headwinds as Clorox. In its just-reported third quarter earnings, Colgate said net sales fell 3.5% because of unfavorable foreign exchange rates, and net income was down less than 1% year over year.
There are risks to investing in Clorox, but its portfolio investments, cost-saving measures, and leading basket of brands should enable it to drive sales higher, maintain profit margins, and generate above-market returns.
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Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV. The Motley Fool recommends CVS Health. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.