Is Walmart Inc. (WMT) the Best FMCG Stock to Buy According to Billionaires?

We recently published a list of 12 Best FMCG Stocks to Buy According to Billionaires. In this article, we are going to take a look at where Walmart Inc. (NYSE:WMT) stands against other best FMCG stocks to buy according to billionaires.

Historically, the consumer-packaged-goods (CPG) industry outperformed most of the other industries, mainly due to the high growth and consistent margins, says McKinsey. However, since 2012, numerous factors, such as inflation, market saturation, significant competition, fluctuating consumer tastes and behaviors, along with a fragmented consumer base resulted in growth challenges. Given increased interest rates and elevated industry multiples over the previous few years, there has been lesser deal activity, says the firm. Furthermore, a range of leading CPG companies continue to take a more measured approach, emphasizing midsize deals and aiming to achieve cost and growth synergies.

What Lies Ahead?

The broader downward trend of rates, along with strong, cash-rich balance sheets (and increased capability to take more affordable debt) of CPG companies can result in higher deal activity over the near future for the sector, says McKinsey. The firm expects a mix of 3 types of transactions, i.e., signature, sector-shaping deals, sizable horizontal deals allowing for greater subcategory consolidation, and targeted spin-offs of brands and business units possessing limited synergies or growth enablers with their current owner.

While the consumer sector remains broad, much of the analysis was focused on the F&B sector. McKinsey anticipates to see increased activity throughout CPG sectors, mainly in the personal care and beauty sectors. However, it also expects that the F&B sector might continue to capture a significant share of deals.

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.

Different Levers for Growth

Deloitte believes that, in 2025, the consumer products companies are likely to address the product portfolio and mix in a bid to entice the consumer and invest across the broad set of demand-generation capabilities. Furthermore, the businesses are projected to develop transformative efficiency so that savings can be produced, which can help finance such investments. Deloitte points out that increasing the unit volume sold remains an important lever that can support in driving profitable growth. Notably, some consumer products companies, mainly the profitable growers, remain focused on innovation to re-engage consumers. Deloitte also highlighted that high-performing companies seem to be adopting a clear-eyed view of their portfolios, and they continue to divest and acquire as needed.

Our Methodology

To list the 12 Best FMCG Stocks to Buy According to Billionaires, we used a screener and Insider Monkey’s exclusive database of billionaire stock holdings to shortlist the companies catering to the broader FMCG space. For the stocks with the same number of billionaire holdings, we have used the number of hedge fund investors as a secondary metric to rank the stocks, as of Q4 2024. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Walmart Inc. (NYSE:WMT)

Number of Billionaire Investors: 20

Number of Hedge Fund Holders: 116

Walmart Inc. (NYSE:WMT) is engaged in the operation of retail and wholesale stores and clubs, e-commerce websites, and mobile applications. Morningstar believes that the company continues to make requisite investments to continue attracting consumers to its stores and fueling customer loyalty. The company’s investments can help it solidify the existing customer base and capture some incremental share from smaller brick-and-mortar retailers which tend to fail to adapt to consumer trends. Despite the fragmented and competitive landscape, Morningstar opines that Walmart Inc. (NYSE:WMT) has managed to carve out an enviable position, with the firm benefiting from proximity to the majority of US consumers, fueling repeat foot traffic.

Furthermore, the margin pressure is expected to abate as Walmart Inc. (NYSE:WMT)’s investments in omnichannel fulfillment as well as its third-party marketplace continue to scale. Elsewhere, Goldman Sachs kept a “Buy” rating on the company’s stock and a price objective of $106. The firm believes that Walmart Inc. (NYSE:WMT) appears to be well-placed to continue to fuel strong earnings growth in 2025, thanks to the market share gains considering the strong proposition of value and convenience.  The company’s investments in e-commerce infrastructure and technology can provide strong returns over the upcoming years. Walmart Inc. (NYSE:WMT)’s online platform is expected to continue to be aided by improved logistics and last-mile delivery capabilities.

Overall, WMT ranks 2nd on our list of best FMCG stocks to buy according to billionaires. While we acknowledge the potential of WMT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than WMT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.