Are Consumer Staples Stocks Lagging Mondelez International MDLZ This Year?

what is consumer staples

Coca-Cola has size, market share and a leading operating margin on its side. Add a savvy leadership team to that mix, and it’s hard to bet against this beverage maker. The company has a proven ability to find growth across product innovation, geographic expansion and fxchoice review strategic acquisitions. For 2024, a report from Economist Intelligence predicts slightly higher retail volume growth, aided by an inflation pullback. Consumers will continue struggling to manage their spending against high food prices and low household savings.

what is consumer staples

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. The Zacks Sector Rank gauges the strength of our 16 individual sector groups by measuring the average Zacks Rank of the individual stocks within the groups. activtrades alternatives For those looking to find strong Consumer Staples stocks, it is prudent to search for companies in the group that are outperforming their peers. A quick glance at the company’s year-to-date performance in comparison to the rest of the Consumer Staples sector should help us answer this question.

On the positive side, the business rationalizations position FLO for higher margins in its food service segment going forward. The company is also seeing positive trends in branded retail sales and the effectiveness of pricing actions to offset cost inflation. Further, FLO is innovating with new products like Nature’s Own Keto Loaf and Dave’s Killer Bread to ensure growth and market share going forward. Use this guide to help you optimize your consumer staples holdings for the coming year. You’ll learn the key behaviors of this segment and how they translate into investment goals.

While consumer staples provide a wealth of benefits, they also have drawbacks. These stocks’ ubiquitous nature and dividend payments may cause them to be overvalued, limiting your potential for long-term growth opportunities. You can mitigate the risk of individual losses in the sector by investing in a consumer staples ETF, which offers an easy route to diversified sector exposure. Consumer staples refers to companies that create products considered essential by consumers. They won’t deliver world-beating returns, but they won’t fail overnight either. Many pay dividends, too, which you can think of as a cash advance on growth.

Example of a consumer staples index fund

Moreover, growing online sales dilutes the power of well-known consumer staples brands. Procter & Gamble is best known for its marquee brands such as Tide, Gillette, and Crest. A large number of its brands hold the No. 1 or No. 2 market share position in their categories, including paper products, laundry detergent, diapers, and beauty products. Consumer staples companies may not have the highest earnings growth or year-over-year revenue growth because these stocks tend to be large, mature companies. But these stocks make up for modest growth with low price volatility, reliable profits, dividends, and defensive positioning. Although the economic outlook remains uncertain, consumers are likely to continue to need the everyday products—from toothpaste to toilet paper— that staples companies produce and sell.

Investors looking for broad exposure to the sector usually choose ETFs for diversification and convenience. According to data from FactSet, the consumer staples sector had the highest percentages of companies that cited “inflation” on their Q4 earnings calls during this period. This suggests that inflation is a key concern for many consumer staples companies this year.

what is consumer staples

While index funds have the drawbacks of management fees and expense ratios, they provide investors with an instant level of diversification for their portfolios. This is likely to result in less overall loss if the consumer staple market takes a turn. The consumer staples sector may be just the ticket if you’re seeking safe harbors while navigating today’s tumultuous markets.

Top Consumer Staples Stocks Of March 2024

Consumer staples stocks are a popular choice for investors looking for defensive stocks that can provide a steady income stream and protect their portfolios during periods of market volatility. However, these stocks come from companies already established within their respective industries, limiting their potential for growth from the time you invest. Consumer staples companies have stable and predictable revenue streams, which makes them attractive investments for investors seeking steady returns. However, the consumer staples industry is highly competitive, with many companies competing for market share. Overall, the consumer staples sector is steady compared to others, providing essential products and services needed for years to come.

  1. This category also includes alcohol and tobacco.Consumer staples stocks are goods that are always in demand.
  2. However, the company was able to quickly recover, and it posted 9.5% organic revenue growth in 2021.
  3. Vanguard, for example, offers VDC, a consumer staples ETF, and a Consumer Staples Index mutual fund.
  4. Consumer staples play a vital role in the overall economy and have a significant impact on the Gross Domestic Product (GDP).
  5. Keep up with the changing markets, research, trade, & more, wherever you are.
  6. Investors in the consumer staples sector will also want to be aware of changing regulations related to environmental, social and governance (ESG) principles.

Information is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see Barchart’s disclaimer. Since then, KO has grown into a behemoth in the beverage industry and has spurred massive growth in the Atlanta region by investing incredible sums back into the community. Among other achievements, the company pioneered vertical integration by buying out its early bottlers, minting a number of millionaires in the process. Nestle operates in nearly 200 countries, employs over 330,000 people and operates over 400 factories. The company is also one of the biggest shareholders of L’Oreal, another company on our list.

Constellation Brands (STZ)

Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Investors interested in the Consumer Staples sector may want to keep a close eye on Mondelez and Marine Harvest ASA as they attempt to continue their solid performance. Another Consumer Staples stock, which has outperformed the sector so far this year, is Marine Harvest ASA (MHGVY). Keep up with the changing markets, research, trade, & more, wherever you are. Keurig Dr Pepper has beat analysts’ estimates on revenue and EPS for the last three consecutive quarters, despite softness in the at-home coffee segment. Costco operates and membership warehouse stores domestically and abroad.

Investing in consumer staple stocks may provide diversification benefits to your portfolio. Investing in various consumer staple companies can diversify your portfolio and potentially reduce risk. The cosmetics subsector tends to be more volatile than other parts of the consumer staples industry. That’s because trends in the beauty business, which are subject to broader fashion tastes, tend to change more quickly and attract smaller brands. As stocks rise in price, dividend yields will fall if the size of the dividend does not increase as well.

While no stock is completely immune to market volatility, consumer staples stocks tend to decline much less during corrections. At this time of writing, the broad-based S&P 500 index has slipped nearly 7% in the year to date, but the S&P 500 consumer staples sector is only down 4% for the same period. When investing in consumer staples stocks, it’s vital to consider the tax implications and adopt tax-efficient strategies to optimize returns and minimize tax liabilities. Two primary tax considerations for these investments are capital gains taxes and dividend taxes. Another reason you may invest in consumer staple stocks is that you often provide consistent dividend income, an attraction to income-seeking investors. These companies typically have a history of paying dividends, often considered reliable and sustainable.

STZ also consistently generates more than $2.5 billion in cash from operations annually. The company has been transparent and disciplined in its use of that cash. Stated priorities are leverage reduction, organic investments and shareholder returns. The company is investing heavily in innovation, lexatrade review advertising and brand-building—a strategy that’s starting to bear fruit. Solid results in this fiscal year prompted the company to increase its full-year growth guidance, which is now 6% to 8%. In the nine months ended September 30, 2023, the company repurchased $659 million of its common stock.

Any decline in interest rates could also boost the attractiveness of dividend-paying stocks. Also, because these stocks tend to perform in a way counter to the consumer discretionary sector in market recessions, they can help bring balance to a portfolio. A consumer staples index fund is a type of ETF or actively managed mutual fund that primarily invests in assets within the consumer staples index. The other major difference between an index fund for consumer staples and the broader market is their performance. Since consumers tend to purchase staples regardless of economic conditions or industry trends, they stay relatively stable during tumultuous times. Cyclical stocks, meanwhile, such as in the consumer discretionary sector, will often fail to perform well.

Why invest in the consumer staples sector?

Think about both potential outcomes before choosing to invest in these funds. When it comes to personal finance and economic stability, understanding the different sectors of the economy is essential. But what exactly are consumer staples and what role do they play in the Gross Domestic Product (GDP)? In this article, we will explore the definition of consumer staples, their significance in the economy, and provide a few examples to help you grasp their importance. You can invest in the consumer staples sector through individual stocks or ETFs.

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