Consumer goods specialists like Kimberly-Clark (New York Stock Exchange: KMB) offers a sensible approach to the current questionable equity environment, but seems unable to shake off the “boring” label. Frankly, the average retail investor probably won’t bid on his KMB stock to go higher. However, as a recession-proof idea, Kimberly-Clark offers a lot of practicality. Even better, smart money seems to think so too. I’m bullish on KMB.
One of the most recognized home brands, Kimberly-Clark is the hottest name in personal care products. Its flagship product is Cottonnel, a popular brand of toilet paper. Similarly, Kimberly-Clark owns his Huggies line of baby diapers. While these products represent the backbone of basic needs, they also lack emotional catalysts.
Barring supply chain shortages due to the pandemic, not many people are looking for Kimberly-Clark products at their local grocery store. However, investors should pay close attention to his KMB shares. This may well represent a true economic barometer.
One of the most pressing issues currently dominating the business news cycle centers around inflation. The Federal Reserve has pledged to attack higher prices by raising its benchmark interest rate, but inflation remains stubbornly elevated. Similarly, hawkish monetary policy and soaring consumer prices The struggle between is plaguing international central banks.
Fundamentally, the U.S. economy could well be in recession next year. If so, growth-oriented names will struggle. However, KMB’s shares may be largely exempt due to the inelastic demand profile of the underlying company. In other words, people still need to take care of themselves regardless of market fluctuations.
What’s even more compelling is that smart money appears to be targeting KMB stock.
Interestingly, KMB stock has a smart score of 8 out of 10 on TipRanks. This indicates that the stock is likely to outperform the broader market.
Growing demand from KMB stocks and hedge funds
One of the consequences of investing in the post-pandemic new normal centers on the memestock phenomenon. Suddenly, retail traders received information through various public forums and racked their brains with major Wall Street institutions. It’s better.
For KMB shares, smart money comes in the form of hedge funds. While they may have been hurt during the height of the memetic stock boom, these companies represent the experts in the market. They have been doing this for a long time. On average, their collective advice outperforms random voices on the internet.
In particular, hedge funds have gradually increased their positions in KMB shares since September 30, 2021.Around Hint Rank, the number of hedge fund holdings at the end of the third quarter of last year was 827,819. By the third quarter of this year, holdings reached 1,387,879, an increase of nearly 68%.
To be fair, Wall Street analysts are pegging KMB stock as a hold. Moreover, these experts’ collective forecasts predict (as of the time of writing) that KMB could exceed 10%. Admittedly, this story does not lead to confidence.
Nevertheless, this situation may represent a case where analysts may suffer from short-term bias. Since the beginning of the year, KMB’s stock has fallen more than 2% of his. As a perhaps safe and boring market idea, red ink brings many disappointments.
Still, analysts primarily offer guidance. Hedge funds, on the other hand, have to put their money into her KMB stock, in this particular case. For this reason alone, Kimberly-Clark deserves closer scrutiny.
What is your target price for KMB shares?
Turning to Wall Street, KMB stock has a hold consensus rating based on 2 buy, 8 hold and 2 sell ratings. KMB’s average price target is $125.08, suggesting a 10.2% decline.
Kimberly-Clark is better suited to economic realities
No publicly traded company would be unscathed and profitable if a recession hits, but some are better suited than others. Kimberly Clarke has the advantage.
Looking ahead, the harsh reality is that the Fed will very likely hike rates aggressively next year. That’s because the November jobs report was much hotter than expected. Under normal circumstances, countries would prefer a robust labor market above all else. However, this dynamic means more dollars will continue to chase less goods.
Naturally, the Fed would like the opposite situation to be true. To reach this point, the liquidity of the system must be reduced. This is deflationary and may benefit KMB shares as opposed to growth-oriented investments, for example.
Additionally, Kimberly-Clark’s financial profile suggests it is better suited to recessions than other companies. While not a growth machine, the company is paying off in terms of profitability. For example, his net profit margin is 8.84%, higher than his 76% in the industry.
Additionally, Kimberly Clark represents quality business. The company’s return on equity now beats that of his peers by nearly 99%. Also, his return on assets is just under 10%, ahead of his competitors’ nearly 84%.
Finally, Kimberly-Clark brings a decent dividend to the table with a futures yield of 3.3%. The company also features 50 consecutive years of dividend increases, and the status manager won’t give up without a fight, so it’s no surprise hedge funds value his KMB stock. In the face of questionable economic dynamics, it makes more sense.
Disclosure