7 Consumer Staples Stocks to Buy in a Falling Market


  • Consumer staples stocks outperform in falling markets, so investors must pay attention.
  • Procter & Gamble (PG): PG stock will remain steady overall even as tailwinds persist for the overall market. 
  • Kimberly-Clark (KMB): Kimberly-Clark’s rising organic sales are canceling the effects of higher input costs. 
  • Costco (COST): Costco gets dinged for minor issues. It did again, and it’s a buy because of it. 
  • Kroger (KR): Kroger is delivering in 2022 and is confident in its strategy, leading it to raise guidance. 
  • Coca-Cola (KO): Coca-Cola is as cheap as it has been this year, so buy it.
  • Sysco (SYY): Sysco is improving rapidly moving out of the pandemic and is a systemically-important company. 
  • Bunge (BG): Bunge is important as an agricultural commodity firm with massive upside. 
Consumer Staples Stocks - 7 Consumer Staples Stocks to Buy in a Falling Market

Source: Shutterstock

Consumer staples are items considered essential for everyday life. This category typically includes clothing, food, and personal care items that everyone purchases on a regular basis. Accordingly, consumer staples stocks are simply shares of companies that produce and sell those items. 

Consumer staples stocks tend to perform well in difficult times, and have become synonymous with defensive stocks. In short, this group generally performs better than the market in a selloff. That’s held true in 2022. The Consumer Staples Select Sector ETF (NYSEARCA:XLP) has lost about 13% of its value this year. Meanwhile, the S&P 500 has declined more than 23% during the same period. 

Accordingly, it makes sense to pivot to consumer staples stocks in a falling market in order to mitigate losses. Here are the best consumer staples stocks to consider right now. 

PG Procter & Gamble $125.08
KMB Kimberly-Clark $113.21
COST Costco $454.65
KR Kroger $43.16
KO Coca-Cola $54.98
SYY Sysco $73.74
BG Bunge $84.99

Procter & Gamble (PG)

A Procter & Gamble (PG) distribution center in Vandalia.
Source: Jonathan Weiss / Shutterstock.com

Procter & Gamble (NYSE:PG) tops 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 including Tide, Bounty, Charmin, Gillette, and many more. The company’s strategy is to produce superior products with superior packaging and brand communications, dominate the retail landscape, and provide value to consumers. 

Purchasing PG stock makes sense because of the steady nature of its earnings. Procter & Gamble tends to be within a few cents of EPS consensus numbers quarter in and quarter out. Last quarter it missed by a penny, the quarter before that, it beat EPS expectations by 4 cents. This consistently is what long-term investors looking for defensiveness will like to see. 

During the April through June quarter, P&G saw organic volume decrease by 1%. However, organic sales increased by 7%. That’s a testament to the strength of the firm’s brands. Consumers are willing to pay more because of the brand equity P&G provides, and trust that the company is providing high-quality every-day items.   

PG stock has yielded annual returns of 9.43% over the past decade. That’s more than double the return of the New York Stock Exchange, where it is listed. In other words, it’s a strong historical performer that will likely continue to outperform the market.  

Kimberly-Clark (KMB)

Kimberly Clark (KMB) sign, positioned outside the world headquarters’ main entrance.
Source: Trong Nguyen / Shutterstock.com

Kimberly-Clark (NYSE:KMB) stock provides many of the paper and cotton products brands that are ubiquitous in homes, businesses, and schools around the world. As the company notes on its website, its brands are sold in 175 countries and used by one-quarter of the world’s population daily. 

KMB stock has had a tough 2022, declining more than 21% in value. However, there are positives to be taken from what has happened. Kimberly-Clark has dealt with input cost increases that have nearly doubled this year. That should lead to declining EPS figures as rising costs normally cut into earnings. 

That said, Kimberly-Clark notes that it now expects organic sales growth to be between 5% to 7% in 2022. That is an increase over the 3% to 4% growth guidance the company provided at the beginning of the year. Consequently, EPS expectations for 2022 have held steady with between 3% to 9% growth expected. That’s great news for investors. And that’s why, despite the stock losing value, it could be an excellent time to buy. 

Costco (COST)

Costco logo on a sign on a Costco store.
Source: ARTYOORAN / Shutterstock.com

Investors have grown accustomed to expecting perfection from Costco (NASDAQ:COST) stock. That’s the gist of the message from Citi (NYSE:C) analyst Paul Lejuez. Costco’s sales in the most recent quarter were in-line with Wall Street expectations, reaching $70.8 billion. And the company’s earnings per share (EPS), at $4.20, bested consensus figures by 3 cents. 

While those results were impressive, Costco’s margins were something of a problem. The company’s gross margin declined 70 basis points year-over-year, signaling some concern among investors. The problem is that COST stock is an investor favorite and carries rich valuation metrics including a P/E ratio that’s higher than 82% of peers. Investors expect the company to sort out the kinks because Costco is so richly-valued. Thus, a slight snag can lead to rather sharp price declines for this stock. 

That said, I think this recent decline provides long-term investors with an opportunity. Costco is simply too strong a company to ignore. The company has a rich history of creating value as measured by an ROIC vs. WACC that proves Costco invests capital in a way that leads to consistent returns

Kroger (KR)

Kroger (KR) Supermarket. The Kroger Co. is One of the World's Largest Grocery Retailers.
Source: Eric Glenn / Shutterstock.com

Kroger (NYSE:KR) stock is one of the best grocery retail stocks to own in 2022. Food is a consumer staple with inelastic demand, and that is reflected in Kroger’s latest earnings which were released on Sept. 9.

The Cincinnati company has seen sales increase throughout the first half of 2022. In Q2, sales increased 9.33% to $34.6 billion. Excluding fuel sales, overall revenue still increased by 5.8% in the quarter. 

It’s clear that Kroger is reacting strongly to the macro environment that 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 look to save more money and cook more at home. The company has found itself in a strong position as it reacts to inflation that continues to have consumers concerned. Kroger appears to be very confident that the strategy it has pursued will continue to work. As a result, the company has raised full-year EPS guidance to a range between $3.95 and $4.05. 

Coca-Cola (KO)

coca-cola bottles and cans. coke is a blue-chip stocks
Source: Fotazdymak / Shutterstock.com

Coca-Cola (NYSE:KO) shares are currently as cheap as they’ve been in 2022. Consider it a great opportunity to buy the stock. 

The simple bull argument behind Coca-Cola is that this is a stock which is trading well below its lowest analyst target stock price. Currently, KO stock currently trades at $54.50. Among the 25 analysts with coverage, the low target price is $63. 

Coca-Cola last released earnings in late-July. The results were mixed, with sales remaining strong and increasing by 12%. However, costs increased and margins declined leading to EPS declining 28%, to 44 cents in the quarter. 

Coca-Cola shares appreciated in price following the news. And then, in mid-August, they turned downward and have since fallen to a new low price for 2022. That’s more a reflection of the current macro environment than it is a condemnation of KO stock. 

Thus, I think now is the time to buy KO stock for its dividend and capital appreciation upside. Let it sit, reinvest the dividend, and understand why so many have undertaken that strategy in the past. 

Sysco (SYY)

Best Stocks for Students: Sysco (SYY)
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Sysco (NYSE:SYY) stock has declined a very modest 8.8% this year. The foodservice company that distributes products to restaurants, hospitals, and schools is holding up very well relative to the broader market.

There were a lot of positives to be taken from its earnings report in August. Sales increased 17.5% on a year-over-year basis. Gross profit reached $3.4 billion, up 18.1%. And earnings per share hit 99 cents, up dramatically from the 29-cent EPS it reported during the same period in 2021. 

Sysco has shown rapid improvement moving out of the pandemic. Net earnings increased 126% and 60.6% in H1 and Q2, respectively. Sysco is still working through debt issues that affected it during the pandemic. However, it’s clear that Sysco remains a vitally important firm. 

Sysco is a foodservice distributor, and as such, its stock will remain attractive as a necessary link in the supply chain for consumer staples stocks. 

Bunge (BG)

October 18, 2020, Brazil. In this photo illustration the B&G Foods logo seen displayed on a smartphone. BGS stock
Source: rafapress / Shutterstock.com

Bunge (NYSE:BG) supplies oilseed, grain products, and related ingredients. In other words, Bunge is the company providing the basic ingredients that allow consumer staples companies to produce many of their goods. In a way, this is an upstream way to play the entire consumer staples sector.

Currently, the company operates more than 300 port terminals, processing plants, and production facilities. These help put food onto tables. There’s something to be said about that.

I personally like Bunge because it is a value-creating business as measured by its return on invested capital (ROIC) compared to the company’s weighted average cost of that capital (WACC). Firms whose ROIC exceeds their WACC are said to be value-creating

Bunge, with an ROIC of 9.82% and a WACC of 4.3%, is one of those firms. It is the kind of firm that Warren Buffett would tell investors to consider. 

It is also well-regarded by a Wall Street, which currently has it rated as an overwhelming buy. Part of this thesis relates to the ongoing war in Ukraine which has jolted wheat production, and part can be attributed to a rotation toward value stocks. Investors who decide to buy will have shares of a company with 50% upside baked into target prices. 

On the date of publication, Alex Sirois 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.

Article printed from InvestorPlace Media, https://investorplace.com/2022/10/7-consumer-staples-stocks-to-buy-in-a-falling-market/.

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