The Consumer Staples Sector

Nate Crosby |
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The Consumer Staples Sector

Spotlight #2 – Toothpaste and Toilet Paper (also known as Consumer Staples) 

Today we look at the consumer staples sector. At face value, this sector may not seem to be the most exciting but you may be surprised to learn that in the last 15 years it has never been the worst-performing sector. We may not be shouting blockbuster growth anytime soon, but it’s another solid contender for a portfolio offering diversification with over a 2% yield. 

 

What makes up the consumer staples sector?

These are essential products that we use every day. Think of the things you are not able or willing to cut from your monthly budget. While the level of importance varies for all of us, I think we can all agree that food, beverage, tobacco products, toiletries, cleaning supplies, etc. will always find their way into shopping carts. 

 

How should you invest in the consumer staples sector? 

As a reminder from our Utility podcast, typically when you buy sectors you are looking to invest in an area that will outperform and/or provide defensive coverage when you want to preserve as much capital as possible. Our approach to consumer staples is no different as we set our sights on the SPDR XLP for 2022. 

Pro tip: for the sophisticated investor you can certainly break down the top XLP companies and invest in those directly vs picking up the SPDR sector and having a wide variety of companies. However, if you’re working to build your foundation, you may find that SPDR is more efficient from a price point of view. 

 

Is the consumer staples sector positioned to grow in 2022? 

Here are the top 5 reasons why we think so! 

  1. Since 2007, the consumer staple sector has never been the worst-performing 
  2. In fact, it’s the 4th best performing sector since 2007 
  3. It’s outpacing inflation 
  4. The current yield is 1% better than bonds when looking at income and relative stability 
  5. Diversification, diversification, diversification 

 

What does this mean for Crosby Advisory Group?

Maybe it’s all the talk of Oreo Cookies and Vitamin Water but we’re feeling bullish and have added SPDR XLP to our tilts for 2022. In times of uncertainty when investors are concerned with high multiple stocks – we believe consumer staples are well positioned for competitive and steady growth. 


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