Consumer Staple Stocks May Provide Shelter

The S&P 500 is down 4.25% YTD. The consumer staples sector in the S&P 500 index is down only 2.11% YTD. In 2008 when the global credit crisis ravaged markets worldwide, consumer staples was the best performing sector with a decline of 16.61%. For example the financials were down about 50% that year.(Source: Periodic Table of Style Rotation — Why Diversification Matters, American Century Investments).

Generally consumer staple companies that make basic necessities of every day life such as dish washing liquids, soaps, toothpaste, etc. tend to offer stable growth and offer downside protection in adverse market conditions. People rarely cut down on consumer staples even when the economy is in recession. Items such as toothpaste, deodorant, soaps, etc. are cheap to afford. Companies in this sector make profits using economies of scale and product differentiation strategies. Investors looking for shelter in the coming storm this year may want to check out some of the stocks in this sector.

The table below lists 18 stocks in the Consumer Staple stocks traded on the NYSE:


Some of the companies in the list have strong international presence. For example,Colgate-Palmolive (CL) makes a multitude of products such as Colgate Toothpaste, Palmolive dish-washing liquids, Irish Spring bath soaps, etc. Some of Colgate’s brands like Colgate toothpaste are highly popular in emerging countries. Colgate-Palmolive stock has been a long-term winner for investors. In the past 25 years (12/31/83 to 12/31/2009), the total return on a CL stock is a cool  4619% compared to 2989% for peer companies and just 1123% for the S&P 500.(Source: Colgate’s Investor Relations site). Similarly Cincinnati,OH -based Proctor & Gamble (PG) is a Fortune 500 company with operations in many countries. P&G is the owner of many global brands such as Gillette, Iams, Scope, Pampers, Bounty, Olay, etc.

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