In this piece, we will take a look at the 14 best consumer staples stocks to buy now. If you want to skip our introduction to the consumer staples sector, then check out 5 Best Consumer Staples Stocks To Buy Now.
The stock market is made of thousands of stocks that belong to firms operating in different industries and sectors. Broadly speaking, companies can be segregated into two categories. One of these is the business to business segment, which caters to firms that sell their goods and services only to other firms or large entities. The second segment is the consumer facing segment, made of companies like Apple Inc. (NASDAQ:AAPL) which sell products and services to private individuals.
The second segment can further be divided into two categories depending on the nature of their products. Apple is a consumer discretionary firm, which means that its sales depend on the income and money that customers have at their disposal for non essential spending. After all, not buying an iPhone in 2023 is unlikely to cause anyone to lose weight due to a lack of nutrition. The second category within the second segment is consumer staples companies. These lie on the opposite end of the spectrum of discretionary firms as they are made up of companies whose products are essential for daily living. A great example of a consumer staples, or consumer defensive, firm is Walmart Inc. (NYSE:WMT), since buying groceries is necessary to live healthily.
Naturally, the difference between the business models of consumer defensive and consumer discretionary firms also tailors their shares to the economic and stock market environment. As was the case throughout 2022, when inflation is rising and purchasing power and disposable incomes are dropping, consumer discretionary stocks rapidly lose value on the stock market. However, when the economy is growing, the trend is reversed and these stocks are often among the first to appreciate as investor expectations about the future state of the economy are reflected in the share price. For some such stocks, check out 15 Undervalued Cyclical Stocks To Buy Now.
As you might have guessed, consumer staples stocks are the opposite. During a market and economic downturn, their shares do not lose as much as their discretionary peers since people continue to spend on essentials even if their income is dropping. Naturally, this 'defensive' aspect of the shares also means that their growth lags the discretionary stocks in an economic upswing since no one would really buy five tubes of toothpaste instead of one even if the economy is growing in the double digits.
Since the fate of consumer staples stocks is tied to the economy, a brief look at the current economic state of the United States is necessary. U.S. stock markets roared during the first half of this year as an AI fueled hype wave and a robust economy muted fears about a downturn. Consequently, while Apple's shares are up by 38% year to date, Walmart's shares have posted more modest 11.88% in gains. However, the future might be different if we look at the current doom and gloom that has returned to investors' minds once again during the tail end of a year.
Over the past month, the S&P500 index is down by 5.45% while the NASDAQ 100, the NASDAQ Composite, and the Dow Jones Industrial Average (DJIA) have shed 5.10%, 5.97 and 4.46%, respectively. This makes it clear the market is uncertain about the future, particularly about the number of interest rate cuts that might take place in 2024. Additionally, the longer the rates are higher, the greater their impact is on economic growth, which is then tied to the fate of consumer staples stocks.
Looking at these details, one would imagine that consumer staples stocks might be worth looking at. We took a look at some today, and the top picks are The Procter & Gamble Company (NYSE:PG), PepsiCo, Inc. (NASDAQ:PEP), and Walmart Inc. (NYSE:WMT).
To compile our list of the best consumer staples stocks, we first made a list of the 20 largest consumer staples companies in terms of their market capitalization. Then, the number of hedge funds that had bought their shares during Q2 2023 was determined via Insider Monkey's database of 910 hedge funds and the best consumer staples stocks are as follows.
Keurig Dr Pepper Inc. (NASDAQ:KDP) is a beverage company that sells coffee, soft drinks, and other products. As inflationary pressures start to ease all over America, the firm has seen its earnings performance rise as it has either met or beaten analyst EPS estimates in its four latest quarters.
As of June 2023, 40 out of the 910 hedge funds part of Insider Monkey's database had held a stake in Keurig Dr Pepper Inc. (NASDAQ:KDP). Out of these, the firm's largest shareholder is Jim Simons' Renaissance Technologies since it owns 7.8 million shares that are worth $244 million.
Along with PepsiCo, Inc. (NASDAQ:PEP), The Procter & Gamble Company (NYSE:PG), and Walmart Inc. (NYSE:WMT), Keurig Dr Pepper Inc. (NASDAQ:KDP) is a top consumer staples stock.
Altria Group, Inc. (NYSE:MO) is one of the biggest tobacco companies in the world. It is one of the highest dividend paying stocks in the S&P500 index, due to its dividend yield of 9.5% which has jumped due to share price drops. Altria Group, Inc. (NYSE:MO) is also a dividend king since it has grown its dividend for 53 consecutive years.
By the end of Q2 2023, 43 out of the 910 hedge funds polled by Insider Monkey were Altria Group, Inc. (NYSE:MO)'s investors. Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital is the biggest stakeholder among these, due to its $342 million stake.
The Estée Lauder Companies Inc. (NYSE:EL) is an American firm that sells hair care, skin care, and associated products. The stock is rated Buy on average and analysts have penned in a rather sizeable $50 share price upside over the current $141 share price based on the average share price target.
During this year's second quarter, 44 hedge funds among the 910 tracked by Insider Monkey had bought a stake in the company. Terry Smith's Fundsmith LLP is The Estée Lauder Companies Inc. (NYSE:EL)'s largest hedge fund investor since it owns $1 billion worth of shares.
Monster Beverage Corporation (NASDAQ:MNST) is another beverage company that is best known for its energy drinks. The stock has delivered solid returns over the past decade or two, by providing a 31% annual return over the past 25 years.
After sifting through 910 hedge funds for the June quarter of 2023 shareholdings, Insider Monkey discovered that 44 were Monster Beverage Corporation (NASDAQ:MNST)'s shareholders. Out of these, the biggest stakeholder is Neil C. Bradsher's Broadwood Capital since it owns 9.3 million shares that are worth $534 million.
Target Corporation (NYSE:TGT) is an American retailer that sells a wide variety of general use products in its stores. The firm is currently gearing up to 'target' the holiday season in the U.S. by offering toys and games under $25 throughout its outlets.
Insider Monkey dug through 910 hedge funds to see their investments for 2023's second quarter and found that 45 had bought a take in the company. Target Corporation (NYSE:TGT)'s largest investor in our database is Ken Fisher's Fisher Asset Management due to a $272 million investment.
Constellation Brands, Inc. (NYSE:STZ) is an alcoholic beverage company that is best known for its Corona beers. It is one of the few consumer staples stocks that are rated Strong Buy on average on our list, and analysts have penned in a $45 share price upside based on the average share price.
After sifting through 910 hedge funds for their investments during this year's second quarter, Insider Monkey discovered 48 Constellation Brands, Inc. (NYSE:STZ) investors. Brandon Haley's Holocene Advisors is the biggest shareholder among these since it owns $196 million worth of shares.
Philip Morris International Inc. (NYSE:PM) is another tobacco major that controls a large portion of global cigarette supplies. However, the firm is seeking to move away from its dangerous products, and it aims to generate two thirds of its revenue through non smoke sales by 2030.
During 2023's June quarter, 54 out of the 910 hedge funds part of Insider Monkey's research had invested in the company. Philip Morris International Inc. (NYSE:PM)'s largest hedge fund stakeholder is Terry Smith's Fundsmith LLP through a $1.5 billion stake.
Mondelez International, Inc. (NASDAQ:MDLZ) is an American confectionery maker that sells well known brands such as Cadbury. It is one of the strongest consumer staples stocks on our list since the firm has beaten analyst EPS estimates in all four of its latest quarters.
Insider Monkey took a look at 910 hedge fund portfolios for their second quarter of 2023 shareholdings to discover that 55 had held a stake in Mondelez International, Inc. (NASDAQ:MDLZ). Brandon Haley's Holocene Advisors is the biggest investor among these since it owns 3.3 million shares that are worth $247 million.
Colgate-Palmolive Company (NYSE:CL) is a household brand best known for its toothpaste and toothbrushes. Like Mondelez, the firm has also beaten analyst EPS estimates in all four latest quarters. Its shares are rated Buy on average with analysts penning in a $14 upside based on the average share price.
58 out of the 910 hedge funds part of Insider Monkey's database had invested in the company as of Q2 2023. Out of these, Colgate-Palmolive Company (NYSE:CL)'s largest shareholder is Jean-Marie Eveillard's First Eagle Investment Management due to its $854 million stake.
The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), PepsiCo, Inc. (NASDAQ:PEP), and Walmart Inc. (NYSE:WMT) are some best consumer staples stocks that hedge funds are buying.
