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Consumer Staples Have History on Their Side, Pro Says


While not among the sexiest stock picks around, consumer staples offered historically steady returns and remain a good bet looking ahead, investment pro Jim O’Shaughnessy said Monday on “Fast Money.”

“Of the 10 economic sectors, consumer staples actually did the best just as a sector,” he said. “But what we found did a lot better in the consumer staples sector were buying the companies that had the highest shareholder yield” — buyback yield plus dividend yield.

Head of O’Shaughnessy Asset Management and author of “What Works On Wall Street,” O’Shaughnessy performed a sector analysis of the stock market over four decades.

In that period, consumer sectors returned 13.5 percent, he said. “If you looked at buying the 20 percent from consumer staples with the highest shareholder yield, your average annual return went up to about 17.8 percent.”

Among O’Shaughnessy’s favorites were ConAgra Foods, with a dividend yield of almost 4 percent, and Cal-Maine Foods, which “actually has pretty decent momentum behind it.”

“We found that, really, the the sweet spot overall — if you’re not in just sectors but overall — marrying very, very good valuation factors with momentum, that’s a great way to look for great stocks on a both a short- to intermediate-term basis,” he said.

In light of Warren Buffet’s $10.7 billion IBM buy, O’Shaughnessy went bullish on the company. “IBM is one of our biggest holdings across all our strategies,” he said.

Even in tough economic times, O’Shaughnessy said, people still need to eat and drink.

“There are probably not three guys in a garage in Palo Alto, trying to think up a new formula to beat Coke,” he said. “There’s all sorts of people out there trying to beat Google.”

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Trader disclosure: On Nov 9, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian is long AAPL; Najarian is long C; Najarian is long WFC; Najarian is long MS; Najarian is long INTC; Najarian is long YHOO; Najarian is long WFT calls; Najarian is long GE; Najarian is long GRPN; Adami Owns AGU; Adami Owns C; Adami Owns GS; Adami Owns INTC; Adami Owns MSFT; Adami Owns NUE; Adami Owns BTU; Terranova is long LQD; Terranova is long MUB; Terranova is long SU; Terranova is long HES; Terranova is long AXP; Terranova is long IBM; Terranova is long AAPL; Terranova is long EMC; Terranova is long SBUX; Terranova is long EF; Terranova is long TNQ; Terranova is long CAT; Grasso owns AA; Grasso owns AKS; Grasso owns ASTM; Grasso owns BA; Grasso owns BAC; Grasso owns D; Grasso owns KEG; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns XLU; Nations is long SPY

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