Basic consumer goods are items considered essential for everyday life. This category typically includes clothing, food, and personal care items that everyone buys on a regular basis. Therefore, stocks of consumer staples are simply stocks of companies that produce and sell those items.
Consumer staples stocks tend to perform well in tough times and have become synonymous with defensive stocks. In short, this group usually outperforms the market on a sell-off. This is true in 2022. The Select Sector Consumer Staples ETFs (NYSEARC:XLP) has lost about 13% of its value this year. During this time, the S&P500 decreased by more than 23% during the same period.
Therefore, it makes sense to turn to consumer staples stocks in a declining market to mitigate losses. Here are the best consumer staples stocks to consider right now.
|PG||Procter & Gamble||$125.08|
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG) at the top of my list of best consumer staples stocks to buy for a reason. This company sells a wide range of household products with well-known brands such as Tide, Bounty, Charmin, Gillette and many more. The company’s strategy is to produce premium products with superior packaging and brand communication, dominate the retail landscape and deliver value to consumers.
Buying PG stock makes sense due to the stable nature of its earnings. Procter & Gamble tends to be within pennies of consensus EPS numbers quarter over quarter. Last quarter it missed by a penny, last quarter it beat EPS expectations by 4 cents. This is still what long-term investors looking for defensive behavior will like to see.
In the April-June quarter, P&G saw its organic volume decline by 1%. However, organic sales increased by 7%. It’s a testament to the strength of the company’s brands. Consumers are willing to pay more because of the brand value P&G provides, and they believe the company provides high-quality, everyday items.
PG stock has generated annual returns of 9.43% over the past decade. This is more than double the yield of the New York Stock Exchange, where it is listed. In other words, it is a historically successful stock that will likely continue to outperform the market.
Kimberly Clark (KMB)
Kimberly Clark (NYSE:KMB)stock supplies many brands of paper and cotton products that are ubiquitous in homes, businesses and schools around the world. As the company states on its website, its brands are sold in 175 countries and used daily by a quarter of the world’s population.
KMB stock has had a tough year in 2022, dropping more than 21% in value. However, there are positives to be taken from what happened. Kimberly-Clark has faced input cost increases that have nearly doubled this year. This should lead to lower EPS figures, as rising costs normally reduce profits.
That said, Kimberly-Clark notes that it now expects organic sales growth of between 5% and 7% in 2022. This is up from forecast growth of 3% to 4%. provided by the company at the beginning of the year. Consequently, EPS expectations for 2022 remained stable with expected growth between 3% and 9%. This is great news for investors. And that’s why, despite the decline in stock value, this could be a great time to buy.
Investors have grown accustomed to expecting perfection from Costco (NASDAQ:COST) Inventory. This is the main message of Town (NYSE:VS) analyst Paul Lejuez. Costco’s sales in the last quarter were in line with Wall Street expectations, reaching $70.8 billion. And the company’s earnings per share (PES), at $4.20, topped consensus figures by 3 cents.
While those results were impressive, there was a problem with Costco’s margins. The company’s gross margin fell 70 basis points year-over-year, signaling some concern among investors. The problem is that COST stock is an investor favorite and features rich valuation metrics, including a P/E ratio above 82% of its peers. Investors expect the company to fix the issues, as Costco is highly regarded. So, a slight hitch can lead to pretty steep price drops for that stock.
That said, I think this recent drop provides an opportunity for long-term investors. Costco is simply too strong a company to ignore. The company has a rich history of creating value measured by an ROIC against WACC that proves that Costco invests capital in a way that leads to consistent returns.
Kroger (NYSE:KR) is one of the best grocery retail stocks to own in 2022. Food is a staple with inelastic demand, and that’s reflected in Kroger’s latest results that were released Sept. 9.
The Cincinnati company saw sales increase throughout the first half of 2022. In the second quarter, sales rose 9.33% to $34.6 billion. Excluding fuel sales, overall sales still increased by 5.8% over the quarter.
It is clear that Kroger is reacting strongly to the macro environment which continues to test consumers. Kroger’s in-store value line, Our brands, achieved a 10.2% increase in sales during the second quarter.
Additionally, shoppers are spending more on groceries as they seek to save more money and cook more at home. The company has found itself in a position of strength as it reacts to inflation which continues to worry consumers. Kroger seems very confident that the strategy it has pursued will continue to work. As a result, the company raised its full-year EPS guidance to a range between $3.95 and $4.05.
Coca Cola (NYSE:KO) stocks are currently as cheap as they were in 2022. Consider this a great opportunity to buy the stock.
The simple bullish argument behind Coca-Cola is that it is a stock that is trading well below its lowest analyst target price. Currently, KO stock is currently trading at $54.50. Among the 25 analysts covered, the low target price is $63.
Coca-Cola published its latest results at the end of July. Results were mixed, with sales remaining strong and increasing by 12%. However, costs rose and margins shrank, driving EPS down 28% to 44 cents in the quarter.
Coca-Cola shares rose after the news. And then, in mid-August, they turned lower and have since fallen to a new low for 2022. This is more a reflection of the current macro environment than a condemnation of knockout stocks.
Thus, I think now is the time to buy KO stock for its dividend and capital appreciation. Let it rest, reinvest the dividend, and understand why so many have adopted this strategy in the past.
Sysco (NYSE:SYY) the stock is down a very modest 8.8% this year. The food service company that distributes products to restaurants, hospitals and schools is holding up very well against the broader market.
There were a lot of positives to take from his earnings report in August. Sales increased 17.5% year over year. Gross profit reached $3.4 billion, up 18.1%. And earnings per share reached 99 cents, up dramatically from the EPS of 29 cents it reported during the same period in 2021.
Sysco showed rapid improvement coming out of the pandemic. Net profit increased 126% and 60.6% in the first half and second quarter, respectively. Sysco is still struggling with debt issues that plagued it during the pandemic. However, it is clear that Sysco remains a vitally important business.
Sysco is a foodservice distributor and as such its stock will remain attractive as a necessary link in the consumer staples inventory supply chain.
Bunge (NYSE:BG) provides oilseeds, grain products and related ingredients. In other words, Bunge is the company that provides the basic ingredients that allow consumer goods companies to produce many of their products. It’s kind of an upstream way of playing on the whole consumer staples sector.
Currently, the company operates more than 300 port terminals, processing plants and production facilities. These help put food on the tables. There is something to be said about this.
Personally, I like Bunge because it’s a value-creating company measured by its return on investment (ROIC) compared to the weighted average cost of this capital (WACC) for the company. Companies whose ROIC exceeds their WACC are said to create value.
Bunge, with an ROIC of 9.82% and a WACC of 4.3%, is one such company. It’s the kind of company that Warren Buffett would tell investors to consider.
It is also well regarded by Wall Street, which currently views it as a crush buy. Part of this thesis focuses on the ongoing war in Ukraine that has rocked wheat production, and part of it can be attributed to a rotation into valuable stocks. Investors who decide to buy will have shares of a company with a 50% upside priced into target prices.
At the date of publication, Alex Sirois did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.