Americans are not as confident about the economy as they were till some time back. Rising cost of living, high inflation and ongoing geopolitical tensions in the Middle East have been denting consumer sentiment.
Markets have remained volatile over the past two months, and investors are still unsure about the Federal Reserve’s future monetary path.
Given this scenario, we recommend buying four defensive stocks from the consumer staples sector, namely, The Vita Coco Company, Inc. COCO, Darling Ingredients Inc. DAR, John Wiley & Sons, Inc. WLY and Archer-Daniels-Midland Company ADM.
Consumer Sentiment Declines
The University of Michigan's Surveys of Consumers reported last week that its Consumer Sentiment Index declined to 51 in August from 55.2 in the prior month. The August reading also fell short of economists’ expectations of a reading of 54.5.
This is also the first time that consumer sentiment has deteriorated in three months. Consumer expectations for inflation over the next 12-month period rose to 4.3% in August from 4.2% in July. The five-year, or long-term inflation expectations index remained unchanged at 3.3%.
Growing concerns over the economy’s health have been denting consumer sentiment. Inflation eased over the past two months but remains sharply above the Federal Reserve’s 2% target. Oil prices have eased lately after surging more than 40%, following the start of the Middle East conflict earlier this year.
However, energy prices are still a lot higher. Also, the conflict between the United States and Iran is far from over, as there are no concrete signs of negotiations between the two warring nations.
The Federal Reserve left interest rates unchanged at the end of its FOMC meeting in July. The central bank is likely to go for a 25-basis point interest rate hike this year, but uncertainty remains over the timing. Markets have remained volatile for a while, and this could continue for a longer period if the uncertainty continues and consumer sentiment remains low.
4 Consumer Staples Stocks With Upside
The Vita Coco Company
The Vita Coco Company, Inc. provides a beverage platform. COCO’s brands include coconut water, Vita Coco; clean energy drink Runa; sustainable enhanced water, Ever & Ever, and protein-infused water, PWR LIFT.
The Vita Coco Company’s expected earnings growth rate for the current year is 64.7%. The Zacks Consensus Estimate for current-year earnings has improved 11.4% over the past 60 days. COCO currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Darling Ingredients
Darling Ingredients Inc. is a global developer and producer of sustainable natural ingredients derived from edible and inedible bio-nutrients. DAR serves customers across the pharmaceutical, food, pet food, animal feed, industrial, fuel, bioenergy and fertilizer markets.Â
Darling Ingredients’expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 53% over the past 60 days. DAR currently has a Zacks Rank #1.
John Wiley & Sons
John Wiley & Sons, Inc. is a global provider of knowledge and knowledge-enabled services that improve outcomes in areas of research, professional practice and education. Through the Research segment, WLY provides digital and print scientific, technical, medical and scholarly journals, reference works, books, database services, and advertising.Â
John Wiley & Sons has an expected earnings growth rate of 14.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 90 days. Currently, WLY has a Zacks Rank #2.
Archer-Daniels-Midland Company
Archer-Daniels-Midland Company is one of the leading producers of food and beverage ingredients as well as goods made from various agricultural products. ADM processes oilseeds, corn, wheat, cocoa and other feedstuffs. It also engages in the manufacturing, sale, and distribution of products like natural flavor ingredients, flavor systems, natural colors, proteins, emulsifiers, soluble fiber, polyols, hydrocolloids, natural health and nutrition products, as well as other specialty food and feed ingredients.
Archer-Daniels-Midland Company has an expected earnings growth rate of 52.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10.2% over the last 90 days. ADM has a Zacks Rank #1 at present.
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