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5 Consumer Stocks Hedge Funds Love

Stocks in this article: WMT PG ADM DF KMB


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There's no bigger consumer stock out there than Wal-Mart (WMT - Get Report). The $250 billion retailer sells products to more than 200 million consumers each week, earning almost $450 billion in revenues across more than 10,000 stores. Those stats make Wal-Mart the biggest retailer in the world, a title that the firm has managed to barricade through impressive top line growth over the past few years.

Wal-Mart's retail crown is predicated on price. Founder Sam Walton's "Always Low Prices" slogan wasn't just lip service -- the firm is aggressive when it comes to negotiating with suppliers, a group over whom Wal-Mart typically has substantial pricing power. That's helped fuel better-than-average margins for Wal-Mart, and kept shoppers flooding the firm's big box locations for bargains. But competition remains fierce domestically, and international stores (located in 26 countries) have been a drag on performance for a decade. Margins may have to come down if Wal-Mart wants to avoid atrophying share in its core U.S. market.

Still, scale is a major advantage for the Bentonville, Arkansas-based company. The firm has the footprint to spread centralized costs across thousands of stores in order to limit the impact of things like advertising and executive pay on the income statement. And Wal-Mart's pricing power should continue to be a big boon, particularly when dealing with the many suppliers that count WMT as their biggest customer.

>>5 Stocks Poised for Breakouts

So far, hedge funds picked up 1.51 million shares of the retailer, ramping up their exposure by almost 20%.

Wal-Mart is also one of Warren Buffett's holdings.

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