logo
  Join        Login             Stock Quote

Get Offensive With Consumer Staples

 May 04, 2011 03:18 PM
 


by Marc Lichtenfeld, Investment U‘s Senior Analyst

There's an old saying; when the going gets tough, the tough buy consumer staples stocks – or something like that. Historically, the sector has been viewed as a defensive position. It makes sense. Even if the economy stinks, you're still going to brush your teeth, use the toilet and feed your kids (at least I hope you are).

In the past year, the consumer staples sector, as measured by the Consumer Staples Sector SPDR (NYSE: XLP), is up 14.9 percent, outperforming the S&P 500's rise of 13.6 percent. John Roque, Managing Director at WJB Capital, points out that consumer staples and the S&P 500 are closely correlated. When consumer staples stocks are strong, the S&P 500 tends to follow suit.
To see the chart in its original size, click here.Source: WJB Capital

[Related -Staples, Inc. (SPLS): How Q3 Earnings Will Fare?]

But now with inflation rising, some investors are getting scared away from consumer staples. They believe the higher costs are going to pinch margins and will drive consumers to cheaper private label brands…

[Related -For Maximum Total Return Go For Growth]

Investors Are Wrong About Consumer Staples Future Strength

Those investors are wrong. Consumer staples should remain strong in the foreseeable future…

While commodity and raw material costs are climbing, consumer staples companies are passing those costs along to customers. Last week consumer products giants Procter & Gamble (NYSE: PG) and Kimberly-Clark (NYSE: KMB) said they were each raising prices on diapers by as much as seven percent. On Monday, Colgate-Palmolive (NYSE: CL) suggested it would also lift prices on some of its products.


Next Page >>12
iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageInitial Jobless Claims Rose Unexpectedly

Claims unexpectedly rose in the latest report through last weekend to breach 300,000 for the first time read on...

article imageAll Quiet on the Record High Front

What can we glean from the media’s lack of attention to the market’s recent record read on...

article imageThe Chip Maker Short Sellers Should Be Watching

Investing in semiconductor stocks is always tricky. Industry cycles can lead to bumps in the road for the read on...

article imageChicago Fed: US Economic Growth Slowed In October

The pace of US growth slowed more than expected in October, according to this morning’s update of the read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

Jobs Growth Tepid At Best
More Articles on: Consumer Staples



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.