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Five Consumer Staples Stocks to Buy Amid High Inflation, Risk of Recession

Five consumer staples stocks to buy amid high inflation, risk of recession and Russia’s continued invasion of Ukraine offer ways to protect from financial…

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Five consumer staples stocks to buy amid high inflation, risk of recession and Russia’s continued invasion of Ukraine offer ways to protect from financial fallout.

The five consumer staples stocks to buy provide products and services people need to use frequently as essential items. Food, clothing and shelter are basic human needs and companies that provide them have customers who may scale back on such purchases but not eliminate them.

In contrast, the consumer discretionary sector manufactures and markets luxury goods that consumers may want but could put off buying when economic uncertainties warrant caution. Consumer staples, of which food and beverage are a subset, usually outperform stock indexes during recessions and bear markets. 

Pension Fund Chairman Offers Analysis of Consumer Staples Stocks 

Consumer staples companies tend to have reliable cash flows and can increase prices as costs rise. Consumers will reduce spending in other areas when money becomes tight, said Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter.

For a broader portfolio that focuses on consumer staples generally, there are several good exchange-traded funds (ETFs) that deliver both solid returns and attractive yields. The most volatile of the group, and the one with the highest recent returns, is iShares U.S. Consumer Staples (IYK). Bargain hunters may like the fund’s recent pullback to offer a reduced buy price.

Chart courtesy of www.stockcharts.com

The fund holds 52 stocks and 65% of the fund is in the 10 largest holdings. Top positions include Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO), PepsiCo. (NASDAQ: PEP). The fund also offers a Securities and Exchange Commission (SEC) yield of 1.42%.

Bob Carlson, head of the Retirement Watch newsletter, meets with Paul Dykewicz.

Walmart Ranks as One of the Five Consumer Staples Stocks to Buy

Jim Woods recommends consumer staples stocks in his Intelligence Report newsletter. One of them is Walmart (NYSE: WMT), of Bentonville, Arkansas, the largest U.S. retailer. The stock is a core holding in the Income Multipliers portfolio of his Intelligence Report newsletter.

Walmart reported excess inventory earlier in the year that led to lower-than-expected earnings, but the country’s largest and one of its most important retailers is rebounding, Woods wrote to his subscribers in his latest newsletter. The company reported that it has made significant progress on reducing discretionary inventory and focusing more on “necessity” spending, such as food, toiletries, etc., Woods continued.

Chart courtesy of www.stockcharts.com

“Doing so helped ameliorate otherwise worse results,” Woods wrote. “So, while in the aggregate the latest retail earnings were better than feared, we still can’t rule out that the longer inflation stays in place, and as jobless claims slowly rise, consumer spending won’t be further pressured.”

Paul Dykewicz meets with stock picker Jim Woods, who heads the Intelligence Report newsletter, as well as co-leads Fast Money Alert.

Procter & Gamble Picked as One of the Five Consumer Staples Stocks to Buy

Another Intelligence Report Income Multipliers portfolio position is Procter & Gamble, a Cincinnati, Ohio-based diversified consumer product company. Procter & Gamble offers a strong cash flow that allows it to provide a dividend yield of 2.4%.

In addition, Procter & Gamble has a rising dividend policy. In fact, the company has raised its dividend annually for the past 66 years. 

Potential risks to the company include inflation weighing on its profit margins, weakened sales from emerging markets in China and the effects of a strong U.S. dollar, said Michelle Connell, who heads Dallas-based Portia Capital Management.

Another risk is that consumers may use private label and generic products more than those of Procter & Gamble, Connell continued. Even though the stock is down so far this year, it has a potential upside of 19% within the next 12 months, she added.

Chart courtesy of www.stockcharts.com

Hershey Sweetens Five Consumer Staples Stocks to Buy

The Hershey Company (NYSE: HSY), of Hershey, Pennsylvania, is a Buy recommendation from BofA Global Research, due partly to its resilience in times of economic distress when people crave sweets as comfort food.

“I’m sweet on the company literally known for its ‘Kisses,’ and that is The Hershey Company,” said Jim Woods, who heads the Intelligence Report newsletter and directs High Velocity Options and Bullseye Stock Trader. He has recommended Hershey in the past in High Velocity Options and may do so again in his fast-paced trading service when the timing is right.

Woods explained that as the leading U.S. confectionery manufacturer, Hershey controls around 46% of the domestic chocolate space with brands such as Hershey bars, Reese’s and KitKat.

Chart courtesy of www.stockcharts.com

“Last quarter, HSY saw strong earnings per share (EPS) growth of 22% year over year, and I expect the company to deliver an even tastier result when they report earnings again in late October,” Woods said. “The reason being is that confection sales are up of late, and I think it’s because many consumers are taking refuge in the small pleasures in life where they can, especially considering the dual pinch of rising inflation and soaring gas prices.”

PepsiCo Is Another of the Five Consumer Staples Stocks to Buy

PepsiCo, a Purchase, New York-based global snack and beverage company, is the third of five consumer staples stocks to buy. Its key divisions include Frito-Lay North America (FLNA), Quaker Foods NA, North America Beverages (NAB), Latin America, Europe Sub-Saharan Africa (ESSA) and Asia, Middle East and North Africa (AMENA).

The company also operates in the United Kingdom, Mexico, India and China. Brands include Pepsi Cola, Mountain Dew, Gatorade, Tropicana, Frito-Lay, Quaker and others. BofA has a Buy rating and a $190 price target on the stock. BofA Global Research wrote a research note that its valuation reflects PepsiCo’s “balanced momentum, margin support and brand investments” are capable of delivering the high end of its long-term outlook.

Ramon Laguarta, upon taking over as PepsiCo’s chief executive officer in 2018, pivoted the company toward a growth-oriented path, BofA wrote. Reinvestment in the business and an appetite for risk remain at the core of the company’s cornerstone philosophies of this strategy, shown in PEP’s ramping digitization efforts, new category expansion and supply chain investments to fuel a stronger innovation engine, BofA added.

Chart courtesy of www.stockcharts.com

Coca-Cola Climbs into Five Consumer Staples Stocks to Buy

BofA Global Research placed a Buy rating on Coca-Cola with a $70 price objective, reflecting a target price-to-earnings (P/E) multiple of 26x the investment firm’s fiscal year 2023 earnings per share (EPS) estimate. This valuation is a premium to non-alcoholic beverage peers (22.9x), justified by BofA’s view that Coca-Cola should weather current macro headwinds better than its peers, given its size and pricing model.

Atlanta-based Coca-Cola also is recommended by Mark Skousen, PhD, who added it as a favorite choice in his Forecasts & Strategies investment newsletter. Skousen placed Coca-Cola in his newsletter’s dividend-oriented Flying Five portfolio and has watched it turn a profit this year even though the market overall has dropped.

Chart courtesy of www.stockcharts.com

Coca-Cola Climbs into Skousen’s Flying Five Portfolio

Each August issue, Skousen searches for the five highest-yielding, lowest-priced stocks in the Dow Jones Industrial Average. Coca-Cola is one of four stocks that recently retained a place in that portfolio, featuring good dividend-paying, reasonably priced stocks whose shares look ripe to rise.

Mark Skousen, a descendant of Benjamin Franklin, meets with Paul Dykewicz.

Skousen also teams up with Jim Woods for their Fast Money Alert trading service that recently recommended an energy beverage stock. Both seasoned investment prognosticators scan the beverage industry for stocks that appear positioned to outperform the market in the current conditions of high inflation, supply chain challenges and Fed rate hikes aimed at slowing economic growth.

Connell is another advocate of Coca-Cola, a company that has boosted its dividend payout for the past 60 years. It currently offers a dividend yield of 2.7%. 

Warren Buffett, one of the world’s best investors, must like the stock and dividend, since it ranks as his third-biggest holding, trailing only Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC), Connell said. The stock is up by double-digit percentages this year and has the financial fundamentals to rise higher, she added. 

Michelle Connell leads Dallas-based Portia Capital Management.

U.S. COVID Deaths Near 1.05 Million

COVID-19 cases and deaths can affect supply and demand for products such consumer staples such as food and beverages, especially with the global sourcing of ingredients. It can pay off for investors to track trends in COVID-19 closely.

U.S. COVID-19 deaths rose for the sixth consecutive week by more than 3,000, jumping to 1,048,186, as of Sept. 6, according to Johns Hopkins University. Cases in the United States climbed to 94,880,701. America still faces a sad situation as the nation with the largest number of COVID-19 deaths and cases.

Worldwide COVID-19 deaths in the last week only rose 14,977, compared to more than 33,000 the previous week, to total 6,505,731, as of Sept. 6, according to Johns Hopkins. Global COVID-19 cases climbed nearly 4 million in the past week to reach 606,246,956 on the same date.

Roughly 79.2% of the U.S. population, or 262,908,216, have received at least one dose of a COVID-19 vaccine, as of Aug. 31, the CDC reported. Fully vaccinated people total 224,113,439, or 67.5%, of the U.S. population, according to the CDC. The United States also has given at least one COVID-19 booster vaccine to 108.8 million people, up 300,000 for the second consecutive week.

The five consumer staples stocks to buy feature investments that offer products and services that should sustain resilient demand despite inflation of 8.5%, based on the latest report from the Consumer Price Index. With further risk of a recession after two straight 0.75% rate hikes by the Fed in June and July, as well as possibly another in September as Russia continues attacking Ukraine, the five consumer staples stocks offer a potential refuge for risk-averse investors.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many othersCall 202-677-4457 for multiple-book pricing.

The post Five Consumer Staples Stocks to Buy Amid High Inflation, Risk of Recession appeared first on Stock Investor.

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What Is Helicopter Money? Definition, Examples & Applications

What Is Helicopter Money?What’s a surefire way to encourage spending, and thus, spur growth? How about dropping money from the sky? As far-stretched…

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Former Fed Chair Ben Bernanke describes helicopter money as a “money-financed tax cut.”

Public DomainPictures from Pexels; Canva

What Is Helicopter Money?

What’s a surefire way to encourage spending, and thus, spur growth? How about dropping money from the sky?

As far-stretched as this idea seems, it actually has credence in schools of economic thought, particularly during times of recession or supply shocks. Helicopter money policies inject large sums into the monetary supply either through increased spending, direct cash stimulus, or a tax cut.

This policy has two goals in mind:

1. Expand the supply of money, which improves liquidity

2. Spur economic growth

Economists consider helicopter money to be an option oflast resort, after other measures, such as lowering interest rates or quantitative easing, have either failed to lift an economy out of recession or because interest rates are already as low as they can get. This conundrum is known as a liquidity trap, when the economy is at a standstill because people are hoarding their savings instead of spending.

Since the practice of helicopter money also tends to foster inflation, it typically works best during periods of deflation, when prices, along with overall monetary supply, contract without a corresponding decrease in economic output. One relevant example is the Great Depression. Bank runs resulted in a reduction in both the monetary supply as well as in the overall prices of goods and services.

It takes a whole lot to lift an economy from such dire straits, and in such cases, helicopter money can be a viable option.

Example of Helicopter Money: The COVID-19 Recession

At the onset of the COVID-19 pandemic, the stock market crashed, and GDP nosedived, thrusting the economy into recession. While the Federal Reserve slashed interest rates and instituted a new round of quantitative easing measures, the U.S. government responded with helicopter money.

  • Under the Coronavirus Aid, Relief, and Economic Security Act (CARES), the Trump administration authorized two rounds of direct-to-taxpayer stimulus payments, of $1200 and $600 per person, in 2020.
  • In addition, as part of the Paycheck Protection Program (PPP), payroll loans were offered to thousands of small businesses—and many were quickly forgiven. The Federal Reserve also provided increased liquidity to banks so that they could offer loans to businesses to help them stay afloat.

Who Coined the Term Helicopter Money?

In a 1969 paper entitled “The Optimum Quantity of Money,” economist Milton Friedman coined the term “helicopter drop” as a method to increase monetary policy during times of economic stress. He wrote:

“Let us suppose now that one day a helicopter flies over [the] community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.”

The point was that the easiest way to lift an economy out of troubled times would be to give its population a direct injection of money. This would both expand the monetary supply and as well as increase the disposable income of the populace, resulting in greater consumer spending and increased economic output.

Who Made the Concept of Helicopter Money Popular?

In the 1990s, Japan was facing a deflationary crisis. Its central bank had implemented crippling rate hikes to calm its housing bubble—to disastrous economic effects.

In a 2002 speech to the National Economists Club, then-Fed Governor Ben Bernanke proposed that Japan’s central bank could have re-started the country’s economy through fiscal programs:

“A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money”

However, critics interpreted Bernanke’s words as his way of authorizing indiscriminate money printing, and the moniker “Helicopter Ben” took hold.

Bernanke would go on to chair the Federal Reserve from 2006–2014, and many of his theories were put into practice during the Financial Crisis of 2007–2008 and subsequent Great Recession. In fact, President Barack Obama credited Bernanke’s leadership during the crisis with averting a second Great Depression.

Helicopter Money vs. Quantitative Easing

While helicopter money and quantitative easing are both monetary policy tools, and both increase the monetary supply, they actually have different effects on a central bank’s balance sheet.

Through quantitative easing, a central bank buys trillions of dollars’ worth of long-term securities, such as Treasury securities, corporate bonds, mortgage-backed securities, or even stocks. This increases its reserves and expands its balance sheet. These purchases are also reversible, meaning the central bank can swap out its assets if it chooses.

Helicopter money, on the other hand, involves fiscal stimulus: distributing money to the public. It has no impact on a central bank’s balance sheet. The practice of helicopter money is irreversible, which means it is permanent—and cannot be undone.

In effect, helicopter money is less a long-term economic solution than it is a “one-time” or short-term operation.

Pros of Helicopter Money

In a 2016 blog post written for the think-tank Brookings Institution, Bernanke admitted that his helicopter money reference gave him some bad PR. In fact, he said that their media relations officer, Dave Skidmore, had warned Bernanke against using the term, saying “It’s just not the sort of thing a central banker says.”

But Bernanke insisted, and the moniker stuck.

To this day, Bernanke continues to believe in the practice of helicopter money as a tool the Fed could use in response to a slowdown in the economy. His successor at the Federal Reserve, Janet Yellen, agreed, stating that helicopter money “is something that one might legitimately consider.”

Other central bankers support the concept, particularly in Europe, which suffered from debt crises that mired its economy throughout the 2000s, igniting deflationary pressures like low demand and weak lending, and made recovery exceedingly difficult.

Cons of Helicopter Money

The biggest drawback of helicopter money is the inflation it tends to ignite. And since inflation is notoriously difficult to manage, once the inflationary fires have been stoked, what’s to prevent them from growing out of control—and fostering hyperinflation? That’s what happened in countries like Argentina and Venezuela, when their central banks printed money and gave it to their governments, who in turn gave it to the people. Inflation surged.

Helicopter money also leads to weakened currencies, because as more and more money is printed, its value decreases significantly. It could also deter currency traders from making long-term investments if the practice is prolonged.

Clearly, helicopter money is not a practice a central bank should undertake lightly.

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Arsenal’s $55.9M Loss An Improvement Over Previous Fiscal Year

Arsenal took a heavy loss but saw reasons for optimism.
The post Arsenal’s $55.9M Loss An Improvement Over Previous Fiscal Year appeared first on Front…

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As a team in transition, Arsenal saw some losses in its last`fiscal year — but also saw signs of hope.

The Premier League team took an operating loss of $55.9 million in the fiscal year ending May 2022.

  • That figure was a significant improvement on last year’s $131.9 million loss.
  • The team saved around $39 million in wages compared to the previous year.
  • But broadcasting revenue dropped from $225 million to $178 million.

Arsenal benefitted from the lifting of pandemic restrictions, with matchday revenue rising by around $51.6 million to $453.7 million.

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Streak Snapped

The club failed to qualify for any European competitions in the 2020-21 season for the first time since 1994-95, which led to heavy spending on player contracts. 

“This investment recognises that the Club has not been where it wanted to be in terms of on-field competitiveness and that, as a minimum, qualification for UEFA competition needed to be regained, as a prerequisite to re-establishing a self-sufficient financial base,” the club wrote.

Arsenal credited owners Kroenke Sports & Entertainment for its willingness to invest in the team.

The move has borne fruit this season with Arsenal’s return to the Europa League, the second-tier competition to the UEFA Champions League. The team has already earned $8.4 million for its appearance there, with total potential earnings up to $22.1 million.

The post Arsenal’s $55.9M Loss An Improvement Over Previous Fiscal Year appeared first on Front Office Sports.

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FDA’s drug shortages leader wants companies to start reporting increases in demand

It is no secret that drug shortages have been prevalent in 2022. Several major drug products, such as amoxicillin and Adderall, have been in short supply…

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It is no secret that drug shortages have been prevalent in 2022. Several major drug products, such as amoxicillin and Adderall, have been in short supply for several months and have led to members of Congress applying pressure on the FDA and HHS to resolve the situation.

Valerie Jensen

Speaking at a webinar hosted by the Alliance for a Stronger FDA, Valerie Jensen, the associate director of the FDA’s Drug Shortage Staff, noted both the rise in quality-related issues and increased demand for some products. She called on companies to report such demand increases, even though they are not currently required to do so.

During the Covid-19 pandemic, she said, the agency has seen new challenges mainly related to these increases in demand.

“During the pandemic as well, we had competition on manufacturing lines and that’s still occurring due to vaccine production and other Covid products,” Jensen said. “So, the same products are being made on those lines that are making the vaccines and Covid-related products, and then that creates a competition situation.”

Jensen added that an increase in demand for manufacturing commodities due to large-scale vaccine production is also leading to shortages. Items such as glass, filters and vial hoppers are in short supply. And now the increased demand is centered around the increase in drugs to counter respiratory illnesses.

She said the physical number of drug shortages currently sits at 123, which is “a little above normal,” but there have been around 100 shortages at any given time over the past seven years. Some of those can be chalked up to companies not producing the volumes required to meet market demand. She also added that there were 38 new shortages in 2021, but the FDA is still dealing with them this year.

For some temporary solutions, Jensen said that she has been coordinating with international regulatory authorities more often, to find out what is being marketed and to see if they can import a drug in short supply in the US. She is also coordinating experts to try to mitigate the situation, providing the public with widely available information as well as expediting the review of anything that manufacturers need to boost supplies.

However, Jensen said that the increase in the demand for drugs is not something that will be going away anytime soon.

“One thing that we really see going forward are these demand increases, this is something that is fairly new to us. It’s something that we’re looking at closely,” she said. “We would really want companies to inform us if they’re seeing spikes in demand because that’s currently not required.”

While producers do need to let the FDA know of supply disruption, companies do not need to let the FDA know of spikes in demand, and Jensen would like to see this changed. Also, she would like to apply different uses for supply chain data to look for signals or patterns and ultimately predict shortages.

Jensen added that in some cases it is impossible to prevent a shortage, but she stresses that better notification of when companies are seeing a spike in demand can be a key solution:

In those cases, when we can prevent (a shortage), we are using those same tools to prevent it. So, we’re expediting review, we’re looking at potential ways that we can use flexibility to allow a product to be on the market while the company fixes a problem. All of those tools are really the same for prevention and mitigation. But I think that really the key is early notification. The earlier companies let us know about an issue the earlier we can deal with it.

With the uptick in respiratory illnesses and shortages of drugs such as amoxicillin, Jensen noted that it’s a matter of reaching out and monitoring the market to see what manufacturers are contending with. Also, Jensen will look to work with pharmacy associations and other trade groups to see what is occurring at the pharmacy level and then “put all of those pieces together” to try and help end the shortage.

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