New High of XLP/ Food Ratings - Safe Investments during High Inflation!
CPI remains high and inflation will not subside in the short term.
The biggest single-day outperformances of $Consumer Staples Select Sector SPDR Fund(XLP)$ vs. $Consumer Discretionary Select Sector SPDR Fund(XLY)$ in the past 20 years.
A study covering March 1973 through December 2021 found that 90% stocks outperformed when inflation was low (average inflation below 3%); but when inflation continued to rise, stocks tended to underperform (average inflation above 3%).
Right now, these smart-money traders are piling into one group of "defensive" stocks – consumer staples.
Consumer staple companies, which sell items like food and cleaning supplies,are defensive in this environment.
What Companies Does XLP track?
This table shows the top 10 holdings of $Consumer Staples Select Sector SPDR Fund(XLP)$ . Except for $Estee Lauder(EL)$ , other 9 companies had a good performance last year, with $Costco(COST)$ up 68%.
What Stocks To Watch?
We also discussed Costco Wholesale last year and said we were bullish on COST. It turned out that COST rose more and achieved a record high together with Walmart.
Costco climbed 3.8% after the warehouse retailer reported an 18.7% increase in sales during the five weeks through April 3 over year-ago levels, rising to $21.61 billion and boosting sales for the first 31 weeks of its FY23 to $130 billion, up 16.7% over the comparable period last year.
As a reputed supermarket company, Walmart operates around the world but doesn't increase as fast as Costco.
Walmart generated $152.9 billion in revenue and $5.9 billion in consolidated operating income during 2021 Q4. Walmart was able to rake in serious revenue and income during inflation.
Besides the two giants, $Kroger(KR)$ and $Kohl's(KSS)$ may be also good choices.
PM is the largest tobacco company by market capitalization, which is currently $141.43 billion. The stock is currently yielding 5.83%. It has raised its dividend for 13 consecutive years. In the past year, it has increased 11%.
Food is also an important part of staple stocks. $Hormel(HRL)$ , $Tyson(TSN)$ ,$McCormick(MKC)$ , $Coca-Cola(KO)$ performed well in last year. During inflation, when consumers’ purchase become less, their spending on essentials won’t be affected much.
Among consumer staples, food, seasoning, and tabacoo are the bedrocks.
Funny Food Ratings
There is a picture going viral on Internet about food ratings during qurantine. (Translation version also in this graph)
You can take current prices and 1Y performances as reference to pick your favorite consumer staple stocks.
If you are not familiar with these companies, you can choose $Consumer Staples Select Sector SPDR Fund(XLP)$because it tracks all of these major companies in this field in reasonable proportion.
What's your opinions on Consumer Staple Stocks?
Do you have plan to hold them?
Share your opinions in the comment section!
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