Consumer spending plays a significant role in the economy, according to the U.S. Bureau of Economic Analysis, in Q2, personal consumption expenditures represented nearly 68% of the US national GDP. As a result, economic growth and decline is often led by consumer spending. However, spending on consumer staples goods tends to be less cyclical due to the low price elasticity of demand and the demand for these goods remains relatively constant regardless of the state of the economy or the cost of the product.
The consumer staples sector is comprised of companies that produce and sell essential goods such as food, beverages, household products, and personal care items. This sector is further divided into six industries: beverages, food and staples retailing, food products, household products, personal products, and tobacco.
Despite challenges, the consumer staples sector has consistently outperformed other sectors, making it a popular choice for defensive investment strategies. The sector’s low volatility and consistent revenues also make it an attractive option for investors seeking steady growth and solid dividends.
A Safe Haven in a Volatile Market
Bryan Spillane, Managing Director of Equity Research at Bank of America Securities, in an interview with CNBC on September 20, discussed the performance of consumer staples stocks during periods of rate cuts associated with a soft landing. He noted that historically, these stocks tend to perform well in such environments, with some names consistently outperforming others.
Spillane explained that his analysis showed that certain companies have a history of outperforming their peers during periods of rate cuts. He attributed this to their high-quality business models and stable dividend payments, which make them attractive to investors seeking yield in a low-rate environment.
When asked about the current market environment, Spillane noted that the dynamics within consumer staples are complex, with factors such as price adjustments and disinflation affecting the sector. However, he believed that with interest rates coming down and consumers having more purchasing power, the sector should benefit. He specifically pointed to the discretionary impulse channels, such as convenience stores and gas stations, where companies have struggled with declining traffic. Spillane also highlighted the attractiveness of consumer staples stocks due to their dividend yields, which are historically in the 3% to 4% range. He noted that some names have even higher yields due to depressed valuations.
The consumer staples sector is an attractive option for investors seeking a defensive strategy. The sector has consistently demonstrated resilience and outperformance in various market environments. As interest rates come down and consumers regain purchasing power, the sector is poised to benefit significantly, with that in context let’s take a look at the 8 best consumer staples stocks to buy right now.
A busy grocery store aisle stocked with the company’s weight management products.
Our Methodology
To compile our list of the 8 best consumer staples stocks to buy right now, we used the Finviz and Yahoo stock screeners to find the largest consumer staples companies. We then narrowed our choices to 8 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Best Consumer Staples Stocks To Buy Right Now
8. Target Corporation (NYSE:TGT)
Number of Hedge Fund Investors: 52
Target Corporation (NYSE:TGT) is a major American retail corporation, offering a wide range of consumer products from groceries and clothing to electronics and home goods. The company is known for its affordable prices and stylish offerings and operates around 1,900 stores across the US.
On October 30, Target Corporation (NYSE:TGT) announced daily and weekly deals, starting from November 1 through December 25, with up to 50% off exclusive deals for members of its free-to-join Target Circle program. The company’s decision to cut regular prices on over 2,000 items across its national and owned brand assortment for the holiday season will contribute to its competitive pricing strategy. This move will not only attract price-sensitive customers but also increase the average transaction value and drive sales.
Additionally, Target Corporation (NYSE:TGT) is amplifying its first holiday marketing campaign and Target Wonderland events in New York City, Atlanta, and Dallas, which will enhance the shopping experience and create a festive atmosphere, making Target a go-to destination for holiday shopping.
Overall, Target Corporation’s (NYSE:TGT) strategic initiatives, competitive pricing, and enhanced shopping experience make it well-positioned to attract customers and drive sales during the holiday season. Additionally, Target Corporation’s (NYSE:TGT) loyalty program, Target Circle, will continue to see growth momentum. The company’s new CFO, Jim Lee, appointed in September is also expected to focus on expanding margins, with a focus on driving purchase volume per customer.
7. Kenvue Inc. (NYSE:KVUE)
Number of Hedge Fund Investors: 58
Kenvue Inc. (NYSE:KVUE) is an American consumer health company that was formed in 2022, as a spinoff from Johnson & Johnson’s Consumer Healthcare division. The company offers everyday healthcare products to consumers through popular brands such as Tylenol, Listerine, and Band-Aid.
On November 4, Kenvue Canada Inc., a division of Kenvue Inc. (NYSE:KVUE), announced the completion of its newly expanded manufacturing facility in Guelph, Ontario. The expansion has increased the facility’s manufacturing footprint by 7.5% and has enabled Kenvue Inc. (NYSE:KVUE) to significantly increase its production capacity to meet the growing demand for essential medicines including iconic brands such as Tylenol, Motrin, Benylin, and Sudafed.
The Guelph facility, which has been in operation for over 50 years, manufactures more than 100 different medications and is a key part of Kenvue Inc.’s (NYSE:KVUE) global supply chain and serves approximately 1.2 billion consumers around the world.
Kenvue Inc.’s (NYSE:KVUE) portfolio of well-known brands is a key driver of its success. The company’s brands, such as Listerine, Tylenol, Zyrtec, and Benadryl, are household names that have been trusted by consumers for decades. These brands have a strong reputation for quality and reliability, which has enabled the company to maintain its market share despite increasing competition.
Kenvue Inc. (NYSE:KVUE) has demonstrated its ability to adapt to changing consumer preferences by increasing its online presence and targeting younger consumers through social media influencers and athletes. The company has also partnered with Sydney McLaughlin-Levrone, a back-to-back Olympic gold medalist and American hurdler, to promote its Neutrogena brand. The company also aims to exit challenging overseas enterprise markets and focus on core brands.
6. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Investors: 64
The Procter & Gamble Company (NYSE:PG) is one of the world’s largest and most well-known consumer goods companies, with a portfolio that includes iconic brands such as Tide, Pampers, and Gillette. The Procter & Gamble Company (NYSE:PG) operates in multiple sectors including beauty, health, fabric, and home care. The Procter & Gamble Company (NYSE:PG) is known for its innovative products and invests heavily in research and development.
For the quarter that ended September 30, The Procter & Gamble Company’s (NYSE:PG) organic sales increased by 2%, compared against a strong base period of 7% growth. Notably, eight out of ten product categories either grew or maintained their organic sales during this period, reflecting solid market performance. In terms of regional growth, focus markets saw a 2% increase, with North America leading the way at 4% and Europe’s markets rising by 3%. Enterprise markets also contributed, posting a 1% growth for the quarter. Additionally, 28 of the top 50 category/country combinations either held or expanded their market share. The company’s Core earnings per share (EPS) experienced a 5% increase compared to the previous year, and on a currency-neutral basis, core EPS grew by 4%. The company’s adjusted free cash flow productivity stood at a robust 82%.
Looking ahead, The Procter & Gamble Company (NYSE:PG) reaffirmed its guidance for fiscal 2025, projecting all-in sales growth between 2% and 4% compared to the previous year. The company also maintained its outlook for organic sales growth, anticipating an increase in the range of 3% to 5%.
The Procter & Gamble Company (NYSE:PG) expects diluted net earnings per share (EPS) growth to be between 10% and 12%, compared to fiscal 2024’s diluted net EPS of $6.02. Additionally, the company continues to forecast core EPS growth of 5% to 7%, based on fiscal 2024’s core EPS of $6.59. The Procter & Gamble Company’s (NYSE:PG) consistent earnings and strong dividend outlook make it a compelling investment opportunity for long-term and income-focused investors.
5. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Investors: 65
PepsiCo, Inc. (NASDAQ:PEP) is a global leader in the food and beverage industry, known for its popular soft drinks, snacks, and packaged foods. The company owns well-known brands like Pepsi, Mountain Dew, Lays, and Quaker. PepsiCo, Inc. (NASDAQ:PEP) operates in more than 200 countries.
PepsiCo, Inc. (NASDAQ:PEP) is well-positioned to capitalize on its dual strength in both the snacks and beverages sectors, giving it a significant advantage in the marketplace. The company’s ability to create bundled offerings or cross-promotions by leveraging its broad portfolio can help boost overall sales. Additionally, the company’s diversified product lineup enhances its bargaining power with suppliers and retailers, allowing it to negotiate more favorable terms and achieve economies of scale. With a strong global presence and well-established distribution networks, PepsiCo, Inc. (NASDAQ:PEP) is set to continue fueling long-term growth, supported by its robust research and development capabilities that allow for continuous innovation in its product offerings.
PepsiCo, Inc. (NASDAQ:PEP) is also embracing digitalization to improve operational efficiency and streamline its supply chain. Furthermore, the company is targeting long-term growth opportunities through evolving consumer habits, especially with Gen Z consumers who are shifting snacking patterns. By staying attuned to these changes, the company is in a prime position to capture a larger share of the snacking market.
From a financial perspective, PepsiCo, Inc. (NASDAQ:PEP) has consistently demonstrated its ability to navigate cost pressures through strategic price increases. The company’s strong pricing power has allowed it to grow revenues even with minor declines in organic volume, which has, in turn, bolstered earnings and cash flow.
This steady cash generation not only supports the company’s operations but also underpins its long-standing commitment to returning value to shareholders through dividends and share buybacks. PepsiCo, Inc. (NASDAQ:PEP) has raised its dividend for over 50 consecutive years and provides a reliable income stream to investors.
4. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Investors: 68
The Coca-Cola Company (NYSE:KO) is one of the most recognized brands in the world, primarily known for its flagship soft drink. The company’s vast beverage portfolio includes sodas, water, juices, teas, and energy drinks under various brands such as Sprite, Fanta, and Dasani. The company operates in over 200 countries and is adapting to changing consumer preferences by offering more low-sugar and healthier beverage options.
One of the company’s most promising growth opportunities is its partnerships with the makers of alcoholic beverages. In March 2023, The Coca-Cola Company (NYSE:KO) began marketing a ready-to-drink beverage that combines Jack Daniel’s whisky and Coca-Cola in America.
On September 17, The Coca-Cola Company (NYSE:KO) and Bacardi Limited announced a new agreement to launch BACARDI rum mixed with Coca‑Cola as a ready-to-drink (RTD) pre-mixed cocktail. This partnership will bring the classic combination of BACARDI rum and Coca‑Cola to consumers in a pre-mixed format. The BACARDI Mixed with Coca‑Cola RTD cocktail is set to debut in several global markets, with an initial rollout planned for select European markets and Mexico in 2025.
In addition to its partnerships with alcoholic beverage makers, The Coca-Cola Company (NYSE:KO) is also expanding its existing brands. Fuze Tea, which was developed with European tastes in mind and launched in many countries in Europe, has a strong momentum, according to the company. Powerade, the company’s energy drink, is also generating volume growth, and Minute Maid Zero, a line of juices launched in 2020, is a key growth engine of the Minute Maid portfolio. These brands have the potential to drive growth for the company and increase its market share in the beverage industry.
The Coca-Cola Company’s (NYSE:KO) strong brand name is one of its most valuable assets. The company is well-known and respected around the world, and it offers over 500 brands in more than 200 countries. This widespread presence and recognition gives The Coca-Cola Company (NYSE:KO) a significant advantage in the beverage market.
3. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Investors: 70
Philip Morris International Inc. (NYSE:PM) is a global tobacco company best known for its Marlboro brand. The company operates in more than 180 countries and is taking steps to reduce the harmful effects of smoking through innovation and regulation. Philip Morris International Inc. (NYSE:PM) is focused on transforming the tobacco industry by shifting towards reduced-risk products such as IQOS, a heated tobacco system that emits on average 95% fewer harmful chemicals compared with cigarettes.
On October 22, for the fiscal third quarter of 2024, Philip Morris International Inc. (NYSE:PM) reported record net revenues and earnings per share. The company’s smoke-free business continues to drive growth, with net revenues increasing by 14.2% and gross profit up by 15.9%. As a result, Philip Morris International Inc. (NYSE:PM) has raised its full-year growth outlook for adjusted diluted EPS to a range of 14% to 15%.
The company’s smoke-free business is a key driver of growth, with shipments of smoke-free products reaching 40 billion units in 92 markets in the third quarter. This segment now accounts for 38% of total net revenues and 40% of gross profit, demonstrating the significant impact it has on the company’s overall performance.
IQOS, the company’s heat-not-burn product, continues to gain traction, with adjusted in-market sales volume up by an estimated 14.8%. This product has strengthened Philip Morris International Inc.’s (NYSE:PM) position as the second-largest nicotine brand in markets where it is present, driving the growth of the heat-not-burn category.
Philip Morris International Inc.’s (NYSE:PM) oral smoke-free products, including ZYN nicotine pouches, have also seen significant growth, with shipment volume increasing by 24.7% in cans and 22.2% in pouches or pouch equivalents. In the US, ZYN shipments reached 149.1 million cans, representing a growth of 41.4% compared to the previous year.
2. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Investors: 71
Costco Wholesale Corporation (NASDAQ:COST) is a multinational retailer known for its membership-based warehouse clubs. The company has built a loyal customer base by providing quality products at lower prices through its unique membership model.
On September 26, Costco Wholesale Corporation (NASDAQ:COST) reported results for the fourth quarter, and fiscal year 2024 ended on September 1. The company’s net sales for the fourth quarter reached $78.2 billion, a 1% increase compared to the same period last year, while net sales for the fiscal year reached $249.6 billion, a 5% increase from $237.7 billion the previous year. The company’s e-commerce sales were particularly impressive, with an 18.9% increase for the fourth quarter and a 16.1% increase for the fiscal year. Costco Wholesale Corporation’s (NASDAQ:COST) e-commerce sales have been growing rapidly, and this trend is expected to continue as more customers turn to online shopping.
Costco Wholesale Corporation’s (NASDAQ:COST) net income for the fourth quarter was $2.35 billion, compared to $2.16 billion, in the same quarter last year. For the fiscal year, net income was $7.36 billion, compared to $6.29 billion in the previous year. The company’s membership-based business model, which provides customers with access to a wide range of products and services at discounted prices, continues to drive sales growth and customer loyalty. As of September 26, Costco Wholesale Corporation (NASDAQ:COST) has 76.2 million paid household members, up 7.3% compared to the prior year.
This loyalty is a key driver of the company’s profitability, as membership fees are a significant contributor to the company’s revenue. Furthermore, the company’s membership base provides a stable source of recurring revenue, which helps to reduce the company’s dependence on volatile retail sales.
1. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Investors: 95
Walmart Inc. (NYSE:WMT) is one of the largest retailers in the world, the company operates over 10,500 stores and clubs in 19 countries and has e-commerce websites that offer a vast range of products from groceries and clothing to electronics and home goods.
On October 22, Walmart Inc. (NYSE:WMT) announced the launch of its nationwide same-day pharmacy delivery service, which will allow customers to receive their prescription medications and general merchandise in a single online order. This service is now live in six states, including Arkansas, Missouri, New York, Nevada, South Carolina, and Wisconsin, and is expected to be available in 49 states by the end of January 2025.
The new offering is designed to provide customers with a convenient and streamlined way to receive their prescription medications and other essential items. With Walmart Inc.’s (NYSE:WMT) extensive network of nearly 4,600 store locations with pharmacies, the company is well-positioned to reach tens of millions of customers across the country. The service will allow customers to manage their entire shopping experience, including their prescriptions, through the company’s app and website, with fulfillment provided by the nearest store.
Walmart Inc.’s (NYSE:WMT) investments in its e-commerce platform have started to pay off, with a 21% year-over-year increase in global e-commerce sales in the second quarter of FY25. The growth in e-commerce has been driven by several factors, including the expansion of distribution centers, fulfillment centers, and third-party seller services.
Walmart Inc.’s (NYSE:WMT) extensive physical footprint provides a significant advantage to its e-commerce business. The company’s marketplace services, which enable third-party sellers to use Walmart Inc.’s (NYSE:WMT) supply chain to fulfill orders, have also grown significantly in the second quarter.
Furthermore, Walmart Inc.’s (NYSE:WMT) automation and AI initiatives are expected to reduce operating costs and enhance margins. The company is also focusing on expanding product categories, engaging more third-party sellers, and expanding its distribution network is also expected to drive growth.
While we acknowledge the potential of Walmart Inc. (NYSE:WMT) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WMT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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