Investing in Consumer Stocks and Cash Cows

It is highly unlikely that half of the American public will suddenly decide to buy different ketchup or frozen potatoes. Thus Heinz seems assured to continue its domination of these food sectors. This is a company that sells things the people will continue to buy during bad as well as good times. It routinely delivers a profit and, yawn, a dividend. Consumer stocks, dividend stocks, stocks that essentially own their market are great long term investments. Investing in ketchup, so to speak, is sound investing. Berkshire Hathaway and their partners in the buyout of Heinz seem to think so too.

What Else Do People Like?

Some time back we wrote about investing in beer. As we said then,

Whether you drink beer or not, investing in beer can be quite profitable. In looking at the different types of stock that do well during recessions and profit during recoveries large brewers typically are on the list. Whether your beer of choice is made by Anheuser-Busch or Inbev, Molson Coors or Carlsberg these companies have the capacity to make money year in and year out. There also have been a series of mergers and acquisitions in the brewing business over the years making for some interesting investments. Picking new winners with new comers to the business as well as each reshuffling of the international brewing business can be profitable when investing in beer.

Investing in Ketchup

The investing issues for consumer products companies that routinely return a profit are twofold. First of all these are stocks with a high margin of safety and continual money makers. Second, the prices of these stocks are commonly reflective of the stability of the company and the constant cash flow. As such these companies tend to sell at low PE ratios. When there is a buyout, as with Heinz, there is a nice bonus to be earned in return for giving up the stock. Investing ketchup, beer, and other stable businesses is typically for the long run.

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