We recently published a list of 8 Best Consumer Staples Stocks To Buy Right Now. In this article, we are going to take a look at where The Coca-Cola Company (NYSE:KO) stands against other best consumer staples stocks to buy right now.
Consumer spending plays a significant role in the economy, according to the U.S. Bureau of Economic Analysis, in Q2, personal consumption expenditures represented nearly 68% of the US national GDP. As a result, economic growth and decline is often led by consumer spending. However, spending on consumer staples goods tends to be less cyclical due to the low price elasticity of demand and the demand for these goods remains relatively constant regardless of the state of the economy or the cost of the product.
The consumer staples sector is comprised of companies that produce and sell essential goods such as food, beverages, household products, and personal care items. This sector is further divided into six industries: beverages, food and staples retailing, food products, household products, personal products, and tobacco.
Despite challenges, the consumer staples sector has consistently outperformed other sectors, making it a popular choice for defensive investment strategies. The sector’s low volatility and consistent revenues also make it an attractive option for investors seeking steady growth and solid dividends.
A Safe Haven in a Volatile Market
Bryan Spillane, Managing Director of Equity Research at Bank of America Securities, in an interview with CNBC on September 20, discussed the performance of consumer staples stocks during periods of rate cuts associated with a soft landing. He noted that historically, these stocks tend to perform well in such environments, with some names consistently outperforming others.
Spillane explained that his analysis showed that certain companies have a history of outperforming their peers during periods of rate cuts. He attributed this to their high-quality business models and stable dividend payments, which make them attractive to investors seeking yield in a low-rate environment.
When asked about the current market environment, Spillane noted that the dynamics within consumer staples are complex, with factors such as price adjustments and disinflation affecting the sector. However, he believed that with interest rates coming down and consumers having more purchasing power, the sector should benefit. He specifically pointed to the discretionary impulse channels, such as convenience stores and gas stations, where companies have struggled with declining traffic. Spillane also highlighted the attractiveness of consumer staples stocks due to their dividend yields, which are historically in the 3% to 4% range. He noted that some names have even higher yields due to depressed valuations.
The consumer staples sector is an attractive option for investors seeking a defensive strategy. The sector has consistently demonstrated resilience and outperformance in various market environments. As interest rates come down and consumers regain purchasing power, the sector is poised to benefit significantly.
Our Methodology
To compile our list of the 8 best consumer staples stocks to buy right now, we used the Finviz and Yahoo stock screeners to find the largest consumer staples companies. We then narrowed our choices to 8 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A row of factory workers assembling bottles of sparkling soft drinks on a conveyor belt.
The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Investors: 68
The Coca-Cola Company (NYSE:KO) is one of the most recognized brands in the world, primarily known for its flagship soft drink. The company’s vast beverage portfolio includes sodas, water, juices, teas, and energy drinks under various brands such as Sprite, Fanta, and Dasani. The company operates in over 200 countries and is adapting to changing consumer preferences by offering more low-sugar and healthier beverage options.
One of the company’s most promising growth opportunities is its partnerships with the makers of alcoholic beverages. In March 2023, The Coca-Cola Company (NYSE:KO) began marketing a ready-to-drink beverage that combines Jack Daniel’s whisky and Coca-Cola in America.
On September 17, The Coca-Cola Company (NYSE:KO) and Bacardi Limited announced a new agreement to launch BACARDI rum mixed with Coca‑Cola as a ready-to-drink (RTD) pre-mixed cocktail. This partnership will bring the classic combination of BACARDI rum and Coca‑Cola to consumers in a pre-mixed format. The BACARDI Mixed with Coca‑Cola RTD cocktail is set to debut in several global markets, with an initial rollout planned for select European markets and Mexico in 2025.
In addition to its partnerships with alcoholic beverage makers, The Coca-Cola Company (NYSE:KO) is also expanding its existing brands. Fuze Tea, which was developed with European tastes in mind and launched in many countries in Europe, has a strong momentum, according to the company. Powerade, the company’s energy drink, is also generating volume growth, and Minute Maid Zero, a line of juices launched in 2020, is a key growth engine of the Minute Maid portfolio. These brands have the potential to drive growth for the company and increase its market share in the beverage industry.
The Coca-Cola Company’s (NYSE:KO) strong brand name is one of its most valuable assets. The company is well-known and respected around the world, and it offers over 500 brands in more than 200 countries. This widespread presence and recognition gives The Coca-Cola Company (NYSE:KO) a significant advantage in the beverage market.
Overall, KO ranks 4th on our list of best consumer staples stocks to buy right now. While we acknowledge the potential of KO to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.