The consumer staples sector comprises those companies that manufacture and distribute the items that many of us consider essential for day-to-day life. So it might come as a surprise to you that the sector, in general, is underperforming the broader market in 2021.
After all, weren’t these companies supposed to thrive during the pandemic? The answer will depend on what part of the sector it occupied. Take alcohol for example. Americans were definitely buying more beer, wine and spirits for their homes. But the category faced two notable headwinds. First, there was the absence of live events. And second, bars and restaurants were in the best case operating under severe restrictions for much of the year.
However, grocery chains and other retailers saw spectacular growth. The question on investors minds is whether that growth narrative is played out. It may be, but an interesting truth of the consumer staples sector is that it provides options for both value and growth investors.
With that in mind, here are three consumer staples stocks that are likely to push higher in July.
1. Kroger
Value investors should take this opportunity to buy Kroger (NYSE:KR) stock. The regional grocery chain has fully embraced the omnichannel model. In the company’s first quarter earnings report it reported a 16% year-over-year increase in digital sales.
It’s also made investments in its in-store experience. And the company has also started to manufacture and process some of its products under its private label brand.
KR stock is up 11.79% in the last 12 months but is outpacing that mark in 2021. For the year, Kroger stock is up over 17%. The company also increased its dividend for the 14th consecutive year in June 2021. And its three-year average dividend growth is over 38%.
2. Target
Target (NYSE:TGT) fits a number of categories, but for the purposes of this article, investors should consider Target as a momentum play. Momentum investing is all about riding the hot hand. And in the case of Target, they have been on fire.
Prior to the pandemic, Target was investing heavily into its omnichannel model that encouraged digital sales. This investment truly paid off as Americans were staying at home. The company has plans to invest over $4 billion annually to expand the options that consumers can order for delivery or pick up as well as remodeling their brick-and-mortar stores.
If investors are concerned about anything, it’s that every new high for TGT stock is a new high and has been for some time. However, current revenue and earnings projections support the lofty expectations, particularly for investors who plan to hold onto the stock.
And it must be noted that Target is part of the exclusive Dividend Aristocrat club meaning it has increased its dividend for at least 50 years.
3. The Boston Beer Company
In the introduction to this article I mentioned that companies such as Boston Beer Company (NYSE:SAM) were missing many of its core audiences during the pandemic. Ironically, the expectation for pent-up demand was a boon to the SAM share price. Over the last 12 months, the stock is up nearly 65%. However, it’s virtually flat in 2021. This suggests that analysts believe that revenue and earnings growth is already baked into the stock price.
However, in the case of SAM stock this may be “Truly” nothing to worry about. The company is seeing strong growth in its Truly brand of hard seltzer. This is one of the fastest growing categories in the spirits sector. And it’s a category that is showing higher growth as an off-premise than an on-premise drink.
Investors looking for broad exposure to this segment should consider investing in an exchange-traded fund (ETF) that covers the sector. One of the top names is the Consumer Staples Select Sector SPDR® Fund (NYSE:XLP). The fund is up over 17% in the last 12 months and nearly 5% in 2021.