3 Consumer Stocks Getting Investor Attention as Risk Appetite Fades

consumer stocks - 3 Consumer Stocks Getting Investor Attention as Risk Appetite Fades

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Investors have lost their appetite for risk. And who can blame them. With war raging in Europe, inflation running at a 40-year high, interest rates climbing, and yet another Covid-19 outbreak in China, now is not the time to be taking risks.

Plus, many of the fast growing, unprofitable stocks that screeched higher in 2020 and during the first half of 2021 have come crashing back to earth, plummeting 70% or more in value. Stocks such as PayPal (NASDAQ:PYPL) and Roku (NASDAQ:ROKU) have pulled back more than 60% since last Labor Day.

In the current environment, it’s understandable that investors would seek out more stable investments and look for stocks that are fairly valued, profitable, and able to withstand market volatility. In the current climate, consumer-focused stocks fit the bill of the type of defensive investments people are in the market for.

Here are three consumer stocks getting investor attention as the appetite for risk fades:

  • Costco Wholesale (NASDAQ:COST)
  • Starbucks (NASDAQ:SBUX)
  • PepsiCo (NASDAQ:PEP)

Consumer Stocks to Buy: Costco Wholesale (COST)

Costco (COST) logo on a sign on a Costco store.
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Costco is one of the best-known and most-trusted consumer brands in North America today. It’s also a premier retailer and tops in the grocery space with more than 800 outlets and nearly 275,000 employees worldwide.

Costco is also the world’s biggest retailer of several key products, ranging from beef to wine. And while the company and its stock performed strongly during the depths of the pandemic, the company has managed to maintain its momentum as the global economy emerged from COVID-19.

Over the past 12 months, COST stock has risen 64%, including a 16% gain in the last six months, to now trade at around $550 a share.

Compare the performance of Costco stock to the shares of other companies that thrived during the pandemic, such as Peloton (NASDAQ:PTON), which has fallen 78% in the last six months, and Netflix (NASDAQ:NFLX), which has come down 41% in the same time period.

Costco has managed to keep its sales growing despite inflation that is running at a 40-year high. The company, which reports on its progress monthly, announced that its January sales increased 15.5% year-over-year.

A big key to Costco’s success in the current environment is its pricing power. The company has raised its annual membership fee by 10% in recent months, and is still recording an 89% renewal rate.

Starbucks (SBUX)

Starbucks (SBUX) coffee cup on a counter
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Change is afoot at Starbucks and it’s not only the phase-out of its iconic cups.

The Seattle-headquartered coffee chain just announced that chief executive officer Kevin Johnson is retiring after five years at the helm. Former CEO Howard Schultz has stepped in as Starbucks interim leader while the company searches for a new permanent CEO.

The loss of Johnson as the CEO comes as Starbucks is grappling with a number of issues, including unionization efforts by employees at several of the company’s stores, notably in the Buffalo, New York area, and inflationary pressures that are forcing the company to raise prices at the risk of alienating customers.

Yet despite the difficulties, Starbucks has proven time and again that it has a loyal customer base and that consumers hold the brand in high esteem.

Strong customer loyalty is one of the reasons why JPMorgan Chase recently upgraded its rating and price target on SBUX stock, saying that shares can rally 22% from current levels near $87 a piece.

JPMorgan upgraded Starbucks stock to “overweight” from “neutral,” and put a $101 price target on the share price, saying in a note to clients that “the brand should still maintain its ‘affordable luxury’ status” in the face of persistent inflation.

Consumer Stocks to Buy: PepsiCo (PEP)

Cans of PepsiCo's (PEP) Pepsi soda are in a bucket of ice.
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While a lot of analysts like to single out shares of Coca-Cola (NYSE:KO) as a rock-solid consumer brand and stable investment during times of tumult, don’t forget about PepsiCo.

The archrival of Coke, PepsiCo has a lot of impressive attributes and compelling reasons to add it to a portfolio. These include the fact that the company has diversified beyond beverages and is today a multinational food and packaged goods company that owns popular consumer brands such as Quaker Oats, Doritos, and Aquafina water.

Soft drinks such as Pepsi and 7-Up are still in the company’s stable of brands, but so too is Lipton Iced Tea and Tropicana orange juice.

Like Starbucks and Costco, PepsiCo has pricing power in the current environment, meaning it can raise the prices of its products without losing too many customers as a result.

The company also pays a dividend of $1.075 per share each quarter, equating to a 2.8% yield. PepsiCo has consistently raised its dividend over the last 10 years regardless of macro-economic conditions.

The company just reported that its fourth-quarter revenue grew an impressive 12.4% from a year earlier. PEP stock has been essentially flat over the past six months, but is up 18% over the last year at around $160 a share.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


Article printed from InvestorPlace Media, https://investorplace.com/2022/03/3-consumer-stocks-getting-investor-attention-as-risk-appetite-fades-pep-sbux-cost/.

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