Investors are often drawn to new, fast-growing companies that have the potential to disrupt industries. There are certainly a lot of publicly traded companies doing just that and bringing significant returns for their shareholders.
That growth often comes with a lot of volatility and uncertainty. But what if there were large and profitable companies investors could bet on that don’t grow as fast as those growth stocks but instead provide stable investments?
Enter consumer staples stocks. These companies are often well-established players that have spent decades building out their markets and that, most importantly, sell consumer products that people need no matter what is happening in the world.
Products in the consumer staples sector may include food products and household products such as:
- Paper products like paper towels and toilet paper
- Beverages like soft drinks, beer, and other alcohol
- Hygiene products and cosmetics
- Cleaning products
If you’re looking for some of the top consumer staples stocks then check out the list I’ve compiled of some of the best companies in the non-cyclical consumer staple sector.
7 Best Consumer Staples Stocks
- Target Corp.
- Procter & Gamble Co.
- Estée Lauder Companies Inc.
- Costco Wholesale Corporation
- Boston Beer Company Inc.
- Darling Ingredients Inc.
- The Hershey Company
Target Corp. (NYSE: TGT)
Price: $172.48 (as of close Aug 12, 2022)
As one of the most popular consumer staples stores, Target hardly needs an introduction. And while consumers may think of Target as a good way to spend a few hours on a Sunday afternoon, investors know that this merchandise retailer is a behemoth in the retail industry.
Consider these eye-popping Target stats from the company’s first-quarter of 2021:
- Comparable store sales spiked nearly 23% from the year-ago quarter
- Digital comparable sales soared 50% year over year
- 90% growth from its same-day service (order pickup, drive up and Shipt deliveries)
- Total revenue jumped 23% to more than $24 billion
- GAAP earnings per share skyrocketed 643% to $4.17
Of course, some of this impressive growth comes because we’re comparing a pandemic-induced slowdown from 2020 to a fully reopened Target in 2021. But it’s important to note that Target has weathered the effects of the global coronavirus pandemic well and has come out on the other side in a very strong position. Not every company has experienced the same fate.
By continually focusing efforts on its e-commerce business, Target has emerged stronger than ever and will likely continue to keep benefiting from its retail merchandise position. The company said that it added $1 billion in market share in the first quarter, on top of a $1 billion market share gain in the first quarter of 2020.
Target’s share price has reflected the company’s stellar growth over the past few years as its stock has gained 222% over the past three years.
Procter & Gamble Co. (NYSE: PG)
Price: $148.56 (as of close Aug 12, 2022)
Market Cap: $350.476B
With a company that’s nearly 200 years old, Procter & Gamble may be one of the most recognizable consumer staples companies. To fully appreciate this consumer staple juggernaut, take a look at these P&G facts:
- Net sales increased 5% in fiscal 2020 to $71 billion
- The company has a massive brand list including Tide, Pampers, and Crest
- P&G experienced growth in 9 out of 10 of its global categories in 2020
- E-commerce sales spiked 40% in 2020 and now accounts for 10% of total sales
- P&G’s earnings spiked 13% in 2020 to $5.12 earnings per share
Remember that with consumer staple companies of this size (P&G’s market cap is $343 billion) you’re not going to see the same sales growth as, let’s say, fast-growing technology companies. But a 5% growth in net sales during a global pandemic is exactly why people invest in consumer staple companies—they make products that people need no matter what’s happening in the world.
P&G’s share price has also delivered for inventors over the past three years, outpacing the S&P 500’s gains by nearly 1.5X.
Motley Fool Stock Advisor
Happening Now: Motley Fool is offering 60% off its top stock-picking service for new members
If you're ready to make investing part of your strategy for financial freedom, take a look at The Motley Fool’s flagship investing service, Stock Advisor. They just announced their top 10 “best buys now” across the entire stock market. Whether you’re starting with $100, $500, or more, you should check out the full details.
Estée Lauder Companies Inc. (NYSE: EL)
Price: $276.37 (as of close Aug 12, 2022)
Market Cap: $98.406B
Estée Lauder is one of the world’s largest skincare and makeup companies with more than 25 brands sold across 150 countries.
While you might think that perpetual Zoom video calls would have decimated demand for Estée Lauder’s products, the company has weathered the pandemic very well.
At the end of the third quarter of 2021, Estée Lauder’s sales jumped 16% and non-GAAP earnings spiked 92%. The company’s CEO, Fabrizio Freda, said in a press release, “We exceeded our sales and earnings expectations, even as several markets experienced increasing pressure from COVID-19 throughout the quarter” and added that sales rose in every region the company sells to.
Investors have flocked to the cosmetic company even during the pandemic and that’s helped Estée Lauder’s share price to beat the broader market’s returns by more than 2.5X over the past three years.
Costco Wholesale Corporation (Nasdaq: COST)
Price: $545.75 (as of close Aug 12, 2022)
Market Cap: $238B
As one of the largest membership warehouses, Costco is firmly in the consumer staples business because it sells so many products that consumers need to have. But investors should know that actually selling the products themselves isn’t the most important thing to Costco’s bottom line.
The company makes the majority of its profit through its memberships. And the beauty of the company’s business is that its memberships are almost always in demand.
Think about it. During tough economic cycles, consumers need to spread their money out as much as possible—so they go to Costco to get good deals on consumer staples products.
And on the flip side, when the economy is good and people have more money to spend, they still go to Costco because there are plenty of consumer staples and some consumer discretionary items (like a fancy new TV!) to spend that money on.
Costco’s ability to perform well in nearly any economic climate has allowed the company’s stock to easily outpace the S&P 500’s gains over the past few years.
Boston Beer Company Inc. (NYSE: SAM)
Price: $382 (as of close Aug 12, 2022)
Market Cap: $4.658B
Yes, alcohol is considered a consumer staple and that’s why Boston Beer Company, with brands such as Samuel Adams beers, Angry Orchard Ciders, Dogfish Head Brewery, and Truly Hard Seltzer is on the list of top consumer staples companies.
In the second quarter of 2021 (reported on July 22), the company’s sales spiked more than 33% to nearly $603 million. That revenue growth was impressive, helping four out of five of the company’s major brands experience a market share increase. Hard seltzer was the one disappointing sector.
But Boston Beer is continuing to innovate as well, with the beverage company establishing a new subsidiary in Canada that will focus on developing non-alcoholic cannabis drinks.
Beer fans and investors alike should love this stock. The company’s share price may have taken a hit earlier this year, but even with that share price slide, Boston Beer has still outpaced the S&P 500 by more than 2.5X over the past three years.
Darling Ingredients Inc. (NYSE: DAR)
Price: $76.48 (as of close Aug 12, 2022)
Market Cap: $12.419B
Darling Ingredients is a different type of consumer staple stock in the sense that it collects and repurposes “animal-based products and other natural materials” to make into new products for feed, food ingredients, and fuel ingredients.
Not only is this a unique position in the consumer staple sector, but the company says it’s the only publicly traded company in its industry. The company’s ingredients are found in everything from health products to nutrients, and bioenergy and its wide-reaching uses have been a boon to the company’s business.
In the most recent quarter (reported on May 11), sales spiked 23% to $1.05 billion and earnings per share jumped 76% to $0.90. The company said it was the best quarter in its history.
And Darling’s growth story doesn’t end with its fantastic quarter. The company’s share price has been on a tear over the past several years, skyrocketing more than 4X the broader market’s returns.
The Hershey Company (NYSE: HSY)
Price: $230.32 (as of close Aug 12, 2022)
Market Cap: $46.277B
Hershey’s is one of the most recognizable chocolate companies in the world with more than 90 brands that bring in more than $8 billion in annual sales. The company has been around for more than 125 years and its recent growth proves that consumers still have a sweet tooth.
In the first quarter of 2021 (reported on April 29), Hershey’s sales jumped nearly 13% from the year-ago quarter and its adjusted earnings popped by 18%. Management said that it was “off to an outstanding start in 2021” and raised its expected full-year net sales growth range to 5%, at the midpoint of guidance.
And just in case you’re doubting whether this chocolate behemoth can keep growing in an increasingly health-conscious world, then consider that Hershey’s recent acquisition of Lily’s Sweets will help the company tap into new markets.
The addition of the low-sugar snack company will help Hershey fill out its better-for-you (BFY) offerings and the company recently said that buying Lily’s is a “strategic complement to our existing offerings in this growing segment of the confection category.”
Whether you’re betting on the company’s megabrand of sweets or the company’s new pursuit of BFY treats, Hershey’s stock looks downright tasty. Shares have gained more than 1.5X the S&P 500’s gains over the past three years.
Consumer Staples ETFs: Invest in a Basket of Consumer Staple Stocks All at Once
Sifting through the stock market to find the best consumer staples stocks isn’t for everyone. If you want your portfolio to have exposure to some of the companies on this list, but don’t want to invest in each individual company, then you may want to buy a consumer staples stock exchange-traded fund (ETF).
Buying a consumer staples ETF will allow you to benefit from this sector without having to take on the same amount of risk—if, for example, one company’s stock price plummets—because your investment is spread across many companies.
There are many different ETFs in the consumer staples sector, but three that investors may want to consider are the Vanguard Consumer Staples Index Fund ETF (VDC), the iShares U.S. Consumer Goods ETF (IYK), and the Consumer Staples Select Sector SPDR Fund (XLP).
Frequently Asked Questions
What are consumer staples stocks?
Consumer staples stocks are companies that either make or sell household and food products that consumers need no matter what their financial situation. For example, consumers will buy toothpaste and toilet paper no matter what the economy is doing, so publicly traded companies that make these products are considered consumer staples stocks.
Are consumer staples stocks considered value stocks?
Technically any stock can be considered a value stock depending on its balance sheet and certain financial metrics. Because consumer staples stocks are typically slow-growing companies with established positions, investors may turn to these stocks as a place to safely, but slowly, grow their portfolios.
What is a good consumer staples stock to buy?
Many of the companies on this list could be good long-term stocks for investors to buy. But the two top-performing stocks from this list are Darling Ingredients and Target. Darling’s share price has gained nearly 245% over the past three years, while Target’s stock has jumped 222%.