You would think that consumer staples would be a sure bet on the stock market considering they're essential in our lives. Historically, that's true in the long term. But that doesn't mean consumer staples investments are free from volatile swings.
Some consumer staples stocks in particular are smart bets for 2021 and beyond.
What are consumer staples stocks?
Something that's staple is an important element of something. Therefore, consumer staples are products or companies that provide products consumers can't live without. Consumer staples include household goods, food and beverages, cleaning products, and other retail items that aren't a mere trend.
Meanwhile, consumer discretionary stocks are on the other side of the spectrum. They tend to follow a more cyclical demand pattern. Consumer discretionary stocks are more closely aligned with non-essential and luxury items. Both have the potential to be lucrative, but consumer staples are more likely to remain consistent despite market fluctuations. Keeping in mind that the stock market isn't the economy, consumer staples stocks aren't going anywhere.
Best food stocks to buy right now
In 2021, Costco Wholesale (NASDAQ:COST) is a solid buy. It's also a dividend stock with a current yield of 0.85 percent. The shares are down 13.5 percent YTD, which means that you can get in on the dip for the long term. Costco's five-year growth is more than 115 percent.
Reynolds Consumer Products (NASDAQ:REYN) does more than just aluminum foil. It also owns Hefty and Fresh-Lock, among others. The stock is only about one year old. Investing now could lead to a smart long-term hold.
Post Holdings (NYSE:POST) is a cereal company that has been around for 126 years. The growth is steady, with its shares 46 percent in the green over the last five years. The "great cereal boom of 2020," as a Chron writer put it, also contributed to the stock's approval.
You might also want to get in on Procter & Gamble (NYSE:PG), which is a gargantuan brand. The past five years have brought 53.72 percent of growth for the shares of a more than two-century-old company. Also, a current dividend yield of 2.74 percent is lucrative.
Consumer staple ETFs to consider
Want to keep your consumer staple investments diversified? There are plenty of ETFs, including:
- the SPDR Consumer Staples Select Sector (XLP)
- the Vanguard Consumer Staples (VDC)
- the iShares Global Consumer Staples (KXI)
- the First Trust Nasdaq Food & Beverage (FTXG)
- the Invesco S&P SmallCap Consumer Staples (PSCC)
PSCC has been particularly lucrative this year with a 22.53 percent return YTD. FTXG has also performed well with 13.33 percent YTD.
Why consumer staples are underperforming
There's something to be said for buying on the dip, particularly when a reliable long-term sector is down across the board. Consumer staples have struggled in 2021, and it most likely has to do with supply chain obstacles stemming from the COVID-19 pandemic. However, their slow and steady growth over the years could mean enhanced returns for those who decide to purchase now.