Hurt by inflation, higher interest rates, and in some company-specific risks, consumer staples stocks are dogs this year. The Consumer Staples ETF (XLP) is down by the double-digits in 2018 with no breakout in sight. Value investors will ask when it is a good time to buy into the sector.
Waiting for the interest rate increase cycle to end could capital losses. General Mills (NYSE: GIS) is already starting to trade within the $42 - $44 range. Its expensive Blue Buffalo acquisition, which cost $8 billion, gives the company another stream of revenue from pet food.
Clorox Company (NYSE: CLX) is starting to break out from its lows. The stock is not cheap and the debt/equity is 3.4 times but the $2-billion share buyback will help the stock.
Pepsi (NASDAQ: PEP) and Coca-Cola (NYSE: KO) trade at higher multiples than say, Proctor and Gamble (NYSE: PG) but all three pay a dividend yielding the 3.5 percent range. Buying and holding for the dividend would work out in the very long run.
Hershey (NYSE: HSY) may have a lower dividend yield, so with high debt/equity levels, the stock may not give investors as much upside.
But J.M. Smucker (NYSE: SJM) may have the biggest upside potential based on its single-digit P/E valuation and on management adding profitability through its $1.7-billion acquisition of Ainsworth. Pet care is a hot area. SJM spent less than General Mills and may get more out of the deal sooner.
