RealMoney

On a day like Friday when most stocks were in the green it is important to go back and see what's not working, in case there are a few tasty bargains to be picked up. I like to scour the 52-week lows for potential turnaround plays, and as the editor of the newsletter Microcap Guru, I am used to seeing some familiar, albeit non-household, names on the list of new lows. The little guys make it interesting, but what has really surprised me of late is the emergence of so many household names on the list of 52-week lows.

Are you familiar with any of these companies? Johnson & Johnson (JNJ) , Molson Coors (TAP) , Colgate-Palmolive (CL) , Coca-Cola (KO) , Kraft Heinz (KHC) ? Unless you live completely off the grid you will be familiar with the names, and the market has been heaping scorn -- and selling -- consumer product and food and beverage stocks for most of 2018. These so-called "defensives" have been anything but defensive the year, and if they form part of the "buy and hold forever" section of your portfolio, you are likely lagging the averages.

Why? Well, part of the appeal of consumer stocks has always been dividend growth, and as we enter a period of higher short-term interest rates -- three-month LIBOR is at 2.36% as of this writing -- the yields on those stocks become relatively less attractive. So, that makes sense.

The other part of the historical appeal of consumer names is steady revenue growth versus sectors such as autos, steel, energy, etc. that exhibit cyclicality. But it is on the revenue line where these companies have been falling short.

As an example, Molson Coors shares were eviscerated Wednesday after reporting a shocking 7.2% year-over-year decline in revenues for its first quarter. It's hard to consider TAP a growth company when sales are actually shrinking, and long-term TAP investors must have felt Wednesday like I did the day after I first tried the company's Molson Canadian beer decades ago. Molson's core EBITDA fell even more than revenues, dropping 19.7% in the quarter, and that is what investors really fear when they see a soft top line.

Going to more salubrious subsegment, Colgate-Palmolive saw the same pressures. Reported sales growth of 6.5% was fine, but stripping out the currency benefits and newly acquired business, CL's organic sales growth was only 1.5% for the quarter. Again, that's just not enough to keep long-term investors interested in the story.

So, now that first-quarter earnings season is virtually over -- and Elon Musk is surely glad about that -- it behooves investors in consumer sectors to refocus on companies that can actually deliver top-line growth. The market is certainly not expecting long-term yields to decline, so any sort of dividend tailwinds for these old-fashioned growth stocks are dissipating. It's all about the revenues now.

If the U.S. consumer is not spending as much on toiletries, packaged foods -- Kraft Heinz has been a total disaster, although you wouldn't know that from the love-in that was Warren Buffett's appearance on CNBC Friday morning -- and fermented beverages, these companies need to find growth overseas and stop fixating on the level of the dollar. Unit volume growth leads to profit growth, and Amazon (AMZN) certainly doesn't seem to have a problem generating incremental volume.

And that's really the bottom line here. Methods of distribution are changing, and combinations like the proposed merger of Sainsbury's and Walmart's (WMT) Asda in the U.K. are going to keep occurring around the globe, I believe. So, companies that sell through those channels better figure out ways to get consumers more interested in their products, or the 52-week low list will continue to be a consumer products stock graveyard.