"The silver lining to the market decline is that it has created tremendous buying opportunities," says Gregory Dorsey.
The contributing editor to Stephen Leeb's Income Performance Report adds, "Consumer staples are set to sail through a tough economy." Here, he takes a look at PepsiCo (NYSE: PEP) and Heinz (NYSE: HNZ).
"From Gatorade and Tropicana to Frito-Lay and Quaker Foods, PepsiCo has built a $42 billion global empire marketing drinks and snacks that consumers are likely to buy through thick and thin making PepsiCo the classic consumer staples company.
"Over the next several years, we expect PepsiCo's earnings to grow at an average annual rate of 10% or more. The stock currently pays a 3.0% yield, and management has raised the dividend for more than 30 years in a row.
"The company has a strong balance sheet with low long-term debt. Best of all, Pepsi stock now trades at its lowest valuation (about 13 times next year's expected earnings) since 1990, making it a compelling buy now.
"In times of economic uncertainty, consumers take solace in comfort foods. And with consumer spending weak, people increasingly are eating at home instead of out.
"HJ Heinz is a good way to capitalize on this trend. Best known for its '57 varieties' of condiments, Heinz actually boasts more than 1,300 products-condiments, sauces, meals, soups, seafood, snacks and infant foods.
"Like PepsiCo, Heinz's offerings are inexpensive and therefore well protected when consumers rein in their spending. As a result, Heinz has delivered fairly consistent, if modest growth over the years.
"With a price/earnings multiple of just 14 times probable profits over the next 12 months, Heinz is trading at a historically low valuation. Plus, the stock yields 4% now, and we think the dividend payout will grow at a 7% annual pace over the next several years."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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