One of the key trends I think investors should buy-into currently is the global consumer boom. As the world’s population increases and people get wealthier, consumer-focused companies are set to do well.
That’s why I think firms that provide products and services for consumers should be an integral part of your investment portfolio. And here are three of my top picks of the moment in this sector.
Diageo
Diageo (LSE: DGE) is one of the world’s leading alcoholic drinks companies, making famous brands like Guinness, Johnnie Walker and Smirnoff. It sells its products in both developed and emerging markets, and is set to steadily increase revenues and profits as countries like China and Malaysia develop a taste for whisky, vodka and other premium beverages.
The share price has been treading water over the past few years, but this business is still churning out multibillion pound profits year-after-year.
A 2016 P/E ratio of 21.32, with a dividend yield of 3.14%, means that this company is on the pricey side. But I think this has potential as a long-term income play.
Whitbread
Whitbread (LSE: WTB) is a hotels and restaurants chain that owns popular brands like Premier Inn and Costa Coffee. Robust advertising and marketing has driven expansion, and this is a business on the up. The firm has been growing earnings steadily, with the 2014 eps of 181.06 set to go to 271.07 in 2018. Although this company has already had a good run, I see plenty of room for it to do well into the future.
What’s more, after the long bull run since lows around the time of the Credit Crunch, Whitbread’s share price has fallen substantially due to profit-taking. This means that now is a great time to purchase shares.
The P/E ratio is 19.91, with a dividend yield of 1.98%, meaning this is a highly rated business. But as one of the winners in the hospitality and catering sector, I still think this company is worth investing in.
EasyJet
A falling oil price has meant crisis for the oil majors. But for transport and travel firms like airline EasyJet (LSE: EZJ) it’s only been good news. Fuel is the biggest cost that flight operators incur, and tumbling gasoline costs mean increasing margins and thus greater profitability for this sector.
Commentators have argued that some of the benefit will be lost because the competing airlines will cut costs more, especially in the cut-throat European market. But over the long term, I think this effect will fade and we’ll see the benefits work their way through to the bottom line.
A pull-back in EasyJet’s share price means that the 2016 P/E ratio has fallen to just 10.57, with a dividend yield of 4.66%. Now that’s cheap. This is an investment that’s both growing profits and raising its income, and I think it’s the perfect time to buy-in.