Consumer Staples Are Back in Fashion. Wall Street Sees Bargains in These Three Stocks
Paper towels and ketchup aren't exactly Wall Street's hottest trades, but they've just given tech stocks a run for their money. Defensive sectors are back in favor for the first time in months, with utilities and consumer staples pulling ahead as tech loses steam. After spending much of the year in the market's bargain bin, staples are finally getting some attention.
Defense wins: The Consumer Staples Select Sector SPDR Fund snapped its losing streak during Oct. 5–9 and managed to beat the broader market for a change. The 10-year Treasury yield also fell for the first time in six weeks, making dividend-paying stocks more attractive. Add weak consumer sentiment from the University of Michigan, and investors had plenty of reasons to favor companies selling things people can't stop buying, even when money gets tight.
- Consumer staples jumped 3.6% for their best week since February, finally giving investors something to cheer about.
- The S&P 500 climbed 1.2% from Oct. 2 to Oct. 9 to a fresh record, even as tech took a back seat to defensive stocks.
Cheap Shelves and Deep Discounts
Morningstar flagged three household names trading far below what it thinks they're worth. Kraft Heinz, Clorox, and Hershey all sit at discounts of 30-45% to fair value estimates. The bruising came from shoppers trading down and cutting back as inflation lingers. Analysts argue the same value-seeking behavior eventually helps the big brands that can cut prices and still make money.
- Food prices are still 33% higher than in 2019, and rising logistics costs are making life even harder for packaged-food companies.
- Kraft Heinz is putting $700M into its brands, while Hershey is betting on new products to keep customers from switching to rivals.
The slow lane pays: Staples offer the steady cash flow and dividends investors tend to favor when the economy looks shaky. With money moving out of cyclical hardware stocks, companies selling everyday essentials are getting another look. Bank of America says demand has stabilized, although rising input costs could still squeeze margins in 2027. Still, Q3 earnings will test whether that optimism holds up as shoppers continue hunting for cheaper alternatives.
