Consumer staples provide many benefits to any portfolio, including solid income, low volatility, and steady growth.
Consumer demand provides stability and the the consumer industry has outperformed the markets. Going forward the consumer industry is changing to accommodate the trends in organic whole foods. The companies leading the change to healthy eating are very attractive to any portfolio seeking stability.
The latest trend is towards artisan products from smaller brands and many larger packaged-food manufacturers have responded by buying or creating smaller brands with formulations to eliminate ‘artificial’ ingredients, such as food colours or high fructose corn syrup.
Another new trend involves shipping the fresh ingredients with cooking instructions and suggested recipes, this allows easy preparation of fresh and healthy meals.
There will always be opportunity to invest in consumer staples, and we look to own market leaders with sound profits, trading at acceptable valuations.
It should be noted that consumer purchase similar volumes annually, and profit growth is therefore in line with both population and income growth.
The emerging markets have higher population growth and incomes ar rising, as more consumers move from poor income to middle class levels.
We recommend EM Consumer staples stocks for income portfolios because the dividend is higher than the yields offered by bonds. Bonds have fixed interest payments, but staples stocks increase dividends as earnings increase.
Going into Q3 and throughout 2018 consumer staples will outperform the markets and justify them reputation for stability, growth, solid income, and low volatility.