I’m following-up on yesterday’s post about my Five Favorite Canadian Consumer Stocks with my top five on the U.S. market.

Five years ago, I created Dividend Stocks Rock. The idea was to build the most comprehensive and effective dividend investing platform. Throughout the past five years, our portfolios did very well (see for yourself). A key part of this success is attributed to asset allocation.

Both consumer defensive and consumer cyclical are two key sectors to build a strong dividend growth portfolio. The first sector will provide you with a shield against major fluctuation while the latter will add some spice to your investment recipe. Here are my favorite consumer stocks:

Disney (DIS)

Disney is the king of content. In 2006, IT bought Marvel for $4 billion. Six years later, Disney sealed another $4 billion deal with the Lucasfilm purchase. Both deals prove Disney’s incredible ability to generate billions of dollars with purchased content. Their latest acquisition, Fox assets, will bolster their content universe to a whole new level. Over the past five years, DIS blockbuster movies and theme parks showed strong potential and have driven both revenues and earnings up. Now that the company announced it will stream ESPN along with the rest of its content in 2019, DIS just unlocked another world of opportunities.

Source : DIS Q4 2018 report

As the company mastered the art of cross-selling, Disney has become an incredible cash flow machine. Its free cash flow has increased significantly in the past five years. Disney just found another way to use its universe of content through streaming. By launching two new services in 2019, the company will become a great complement to Netflix (NFLX). It will not compete against Netflix, it will simply use its popularity (and the fact NFLX developed this market) to surf on the streaming wave. The acquisition of Fox assets will add more fuel to this money-making machine.

Gentex (GNTX)

Gentex makes auto-dimming mirrors to improve drivers’ vision at night. The mirrors automatically darken to eliminate headlight glare for drivers. With a 92.3% market share and thousands of patents to protect its technology, GNTX is far ahead of any other company in this sector. The company also benefits from stricter regulations in Europe to sell its SmartBeam technology enabling a vehicle’s bright headlights to go on and off automatically.

Source: GNTX investors presentation August 2018

Gentex is the leader of its sector with its products on the way to becoming industry standards. On top of that, it shows a stellar balance sheet with barely any debts. If this is the case, GNTX could continue its impressive sales growth for the next 10 years. The company also benefits from being the first to offer this high-quality product. This leads to higher margins for early adoption and puts Gentex #1 in automakers minds for future orders. Gentex is set to continue its growth for at least a decade, not to mention that its current situation makes it a great potential candidate for an acquisition.

Starbucks (SBUX)

Starbucks is one of the recent success stories in the consumer space. Founded in 1971 by the opening of the first coffee shop at the iconic Seattle Pike Market, it now operates 28,000 stores (and counting) in 77 countries. Starbucks is known for its stellar customer experience and its variety of beverages. It built a reputation of listening to its customers and using technology (Facebook, Twitter, mobile payment) to continuously improve its in-store experience.

Source: SBUX investors presentation June 2018

Starbucks has built one of the most successful restauration chains (coffee) in the U.S. It can now use this core business to generate steady cash flow and fuel growth across the world. The company intends to open 500 to 600 new stores yearly in China for several years to come. SBUX has a strong business model and has proven it can export it in other countries. In 2018, the coffee maker even had success selling its products in Italy! SBUX adapts its menu, restaurant and opening hours according to its client tastes rapidly. This flexibility is being driven by their membership application that gives continuous feedback and data to management.

VF Corporation (VFC)

Founded in 1899, VF was first a glove and mitten company. Today, it is over $12 billion in sales and has about 30 different brands in outdoor and action sports, jeans wear, image wear, and sports wear business. VF recently entered the workwear market with the acquisition of Williamson-Dickie in 2017. While VFC has a growth-by-acquisition strategy, it is not afraid to sell brands not suited for its vision anymore. It sold Vanity Fair (2007), John Varvatos (2012), and Contemporary Brand (2016), while focusing on trendy outdoor & actions sportwear apparels (North Face, Timberland, Vans and Lee and Wrangler). VFC is spinning off its denim brands (Lee and Wrangler) into a new business with revenue reaching $2.5B. Both businesses will pay a dividend. It will be interesting to see how it goes.

Source: VFC Q2 2019 investors presentation

How does a glove and mitten manufacturer become a world leading outdoor and action sports apparel company with over $12 billion in sales? We are talking about active brand portfolio management. In a world where fashion evolves at a rapid pace and where brand power means pricing power, VF Corporation cracked the code. While many investors would disregard VFC due to a yield around 2%, keep in mind the company nearly doubled its payout in the past 5 years.

Home Depot (HD)

Home Depot is the world’s largest home improvement retailer by market cap ($229 billion). Founded in 1978, HD is a success story with currently 2,200 stores across the U.S. HD is known for its obsession for client service and this is probably why it has been able to grow so fast since its creation.

Source: HD Q3 2018 infographic

HD has an impressive sales book over $100 billion. The company benefited from the current strength in the home improvement market with a high-single digit annualized revenue growth rate over the past five years. One of the key element is its online success with double-digit growth over the past five years. Its site is amongst the largest ecommerce ones. In the past decade, HD focused on creating seamless renovation services to invite more homeowners to renovate their houses. It also focused on a strong online presence using renovation pictures through social media platforms like Pinterest.

How’s waiting working for you?

Investing when the market is high is not a simple task. You may think you found the right company, but the stock is clearly overvalued. Therefore, you wait until the market offers you an opportunity.

Last year, I didn’t hesitate to invest over $100K in the market. I did it while the market was at an all-time high.

I didn’t blink. I didn’t flinch. Do you know why? Because I know something. A truth. The simple truth of investing: Five years from now, those companies will trade at a higher price.