skip to Main Content

Consumer Staples: 5 Things To Know About This Defensive Sector

Access to our research can help you better understand the industries and companies that make up this sector, with timely performance data and stock, mutual fund, and ETF screeners. Because of its exposure to the restaurant industry, Pepsi was more affected by the early stages of the pandemic. However, the company was able to quickly recover, and it posted 9.5% organic revenue inverted head and shoulders pattern growth in 2021. Through the first six months of 2022, it kept the ball rolling by expanding organic revenue growth by 13.3%. Not every firm will be able to raise their prices (to protect profit margins) without losing too many customers. Companies without strong brand loyalty are susceptible to consumers switching brands, a trend that intensified during the pandemic.

  • In theory, the direction of the moving average (higher, lower or flat) indicates the trend of the market.
  • That said, recent efforts in China to contain the spread of COVID-19 have led the company to reduce its fiscal 2022 guidance.
  • In 2019, it released a line of plant-based cleaning products called Home Made Simple.
  • From now to 31 March 2022, you get to enjoy 5 free trades and super low commissions of US$0.99 per trade thereafter.

The S&P 500 tracks companies that offer yields as high as 5%, but these are diversified across a wide range of industries that can contract sharply during a recession and are therefore riskier. Consumer goods are goods that people cannot or do not want to cut back on, regardless of the state of the economy. This is because companies have to pay more for their inputs but may not be able to pass these higher costs on to consumers. In addition, inflation can affect consumer goods stocks in yet another way. When inflation is high, consumers may cut back on spending, which leads to lower sales for businesses in the sector.

Inflation-Proof Consumer Staples Stocks Worth a Watch Now

Walmart is the world’s largest retailer, the world’s largest company by revenue and the largest employer, with over 2.2 million employees as of 2020. Worldwide, Walmart gets more day trading degree than 260 million customer visits each year. For those who prefer to avoid crowds, there’s the members-only Sam’s Club and Walmart+ subscription delivery options as well.

Conversely, if stocks fall in price and if the dividend payout does not change, then the dividend yield increases. Comprising nearly 70% of the nation’s gross national product (GNP), consumer spending holds a lot of sway over the economy. Economic growth and decline are typically led by consumer spending, which is cyclical. Cyclical means there are ebbs and flows, or times when the consumer spends more and periods when they have more conservative spending habits. McCormick & Company is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry.

  • When inflation is high, consumers may cut back on spending, which leads to lower sales for businesses in the sector.
  • Finder monitors and updates our site to ensure that what we’re sharing is clear, honest and current.
  • Tobacco products giant Altria Group (MO, $48.07) is the company behind Marlboro cigarettes, Black & Mild cigars, and smokeless tobacco products like Copenhagen and Skoal.
  • Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
  • Companies that sell pharmaceutical drugs (like drugstores) are included in the sector as well.
  • Comprising nearly 70% of the nation’s gross national product (GNP), consumer spending holds a lot of sway over the economy.

Available only with a Barchart Plus or Premier Membership, you can base a Stock Screener off the symbols currently on the page. This lets you add additional filters to further narrow down the list of candidates. At the top, you’ll find a histogram containing today’s high and low price. The histogram shows where the open and last price fall within that range. As of the date this article was written, the author does not own any of the above stocks.

Motley Fool Returns

When economic conditions turn sour, consumers tend to continue buying consumer staples regardless of changes in their budget, causing these stocks to remain more stable. Historically, the consumer staples sector has been considered a defensive sector, which means that stocks in this sector typically lose less value than the overall market during recessions and depressions. Investing in the consumer staples sector can provide you with some stability for your portfolio but come with drawbacks. Before investing in consumer staples, read about some essential products that make up the sector and how these investments have traditionally performed.

When you talk about consumer staple stocks, you refer to the consumer staples sector, which groups all the consumer staple stocks. The consumer staples sector is one of the stock market’s 11 sectors and is sometimes called the consumer defensive sector. how to buy a penguin It includes companies that produce goods and services that people need daily, such as food, clothing, and household and personal care products. This category also includes alcohol and tobacco.Consumer staples stocks are goods that are always in demand.

Consumers generally buy these products regardless of their financial situation or economic stability. One of the primary reasons is that consumer staples are considered essential products that people need regardless of economic conditions. Consumer staple companies are less likely to be affected by economic downturns than companies that produce nonessential products.

Personal Product Companies

It is focused on value-conscious consumers who are looking to pinch pennies, which makes it one of the more stable merchants out there when times are tough. Investors can buy consumer discretionary stocks using a standard taxable brokerage account or a tax-advantaged individual retirement account (IRA). If you’re new to investing, or you’d like to change up your current investing accounts, be sure to check out Forbes Advisor’s list of the best online brokerages and the best investment apps.

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. In contrast, the S&P 500 information technology sector has dropped 13%. Additionally, the consumer staples sector has historically experienced lower price volatility compared to other sectors, which are more correlated to business cycles. The sector’s relatively steady sales and profits also provide a source of stability during volatile markets. Broadly speaking, consumer staples are essential products that we use daily such as food, beverages, household and personal care products. While consumer staples provide a wealth of benefits, they also have drawbacks.

Sector Breakdown

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. However, spending on goods produced and sold by the consumer staples sector tends to be far less cyclical due to the lessened price elasticity of demand.

Keeping the demand for these products steady and making these products less susceptible to market fluctuations. Many companies that produce these products have established brand names, solid reputations and loyal customers, which make them further resistant to economic instability and sector competition. Prefer to invest in the consumer staples sector via a ready-made portfolio? Syfe’s Core portfolios hold the XLP ETF as part of their diversified holdings. With Core portfolios, you can start investing from any amount and dollar cost average effectively every month. Start by making a list of the companies that operate in the consumer staples sector or viewing a pre-compiled list like this one by MarketBeat.

This sector includes companies that manufacture and sell items considered daily or weekly consumer necessities. As you might have already guessed, the consumer staples stocks list is relatively lengthy, so to help, we have divided it into categories to make it easier to understand. Since the demand for consumer staples doesn’t slow even in a weak economy, the sector is noncyclical. An added perk is its higher dividend yield than the S&P 500 Index — even during a recession. This stability and ubiquitous need make the consumer staples sector relatively resilient to economic downturns.

Look for companies with a unique product or service that is in demand even when the economy weakens. These companies are more likely to maintain or grow their market share during tough times. Look for companies with strong balance sheets and a history of profitability. These companies are more likely to weather economic downturns and continue to pay dividends.

This Post Has 0 Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

Back To Top

    Information Request

      Information Request

        Information Request

          Information Request

            Information Request

              Information Request

                Information Request

                  Information Request

                    Information Request

                      Information Request

                        Information Request