Grocery Stocks: A Buying Opportunity In A Recession Or Contraction Scenario

 

Grocery stocks are known by outperforming market indexes during the previous bad economic scenarios due to the fact their products are not cyclical but necessities. People will always demand these goods because they still need to cook, wash, and clean. In fact, discounts during these periods tend to perform even better. Moreover, people tend to spend less on restaurants outside home and instead cook at home.

The current economic indicators suggest that a possible economic recession might arrive in the short or medium term. Therefore, is it reasonably good you take a look on grocery stocks that might be interesting during these scenarios, and invest with a contrarian perspective compared to the current market sentiment (but also with a long term view). Another approach would be to take a look on the companies before this negative scenario comes in, and be prepared in advance to pivot to your new asset allocation and security selection.

Given the fact that recessions affect in a very different way to every country, I suggest you diversify across countries so that country risk is not an issue anymore. Of course, ETFs are a good alternative as  investment vehicle in this case, but you might prefer to select stocks in a more specific and tailored way. In any case, you will find in the following list that there are enough grocery stocks trading at relatively low multiples to be able to perform well during that scenario:

- Kroger (USA; 18x P/E Ratio)

- Target Corp. (USA; 11x P/E Ratio)

- Metro Inc (Canada; 23x P/E Ratio)

- Empire Company (Canada; 17x P/E Ratio)

- Atacadao (Brazil; 8x P/E Ratio)

- Tesco PLC (UK; 17x P/E Ratio)

- Carrefour SA (France; 12x P/E Ratio)

- Ahold Delaize NV (The Netherlands; 18x P/E Ratio)

- Colruyt Group (Belgium; 13x P/E Ratio)

- Kesko Oyj (Finland; 19x P/E Ratio)

- Europris ASA (Norway; 16x P/E Ratio)

- Sheng Siong Group (China; 17x P/E Ratio)

- Abdullah Al-Othaim Markets Company (Saudi Arabia; 16x P/E Ratio)

- Woolworths Group Ltd (Australia; 22x P/E Ratio)

Other grocery stocks playing an important role as leaders either globally or in their corresponding geographical locations are Walmart, Costco, 7-Eleven, Aeon, Loblaw Companies, or Dino Polska. However, all thse companies are trading above 25x P/E ratio so that these stocks might not perform well in an economic contraction scenario.