Consumer Goods - Con

Consumer Goods - Con

Points against shares in consumer goods

(i) The very advantages themselves of consumer goods shares give the to the major disadvantage in causing the normally heavy demand and consequent high market price of the shares. It is thus wise to follow closely this section of the market, and to buy when circumstances, as will be explained in later webpage s, cause a drop in price.

(ii)Highly competitive nature of this industry resulting in the profit margins being small. Removal of resale price maintenance may further intensify this competition.

(iii)Wastage of perishable goods (food) and continual changes in fashions, tastes and styling render obsolete large stocks which must then be sold at a loss or discarded altogether.

(iv)The place of origin of the raw materials of many consumer goods, e.g., sugar and rubber, is overseas and apt to be at the mercy of unstable governments.

Consideration of the above advantages may lead you to conclude that to have 35% of your portfolio in consumer goods shares (manufacturers and retailers) is not too high a proportion.

Under consumer goods (perishables) come first food and pro-visions. Examples of leading representatives are: Unilever, Tate and Lyle, Associated British Foods, Ross Group and Spillers.

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More information onOrdinary Shares or Stock Units in 2016



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