The severity of the global pandemic has many investors pulling out the old playbook. The coronavirus has caused plenty of data deterioration and the drumbeat of a possible recession continues to grow larger. The idea now isn’t to shoot for the moon but to find steady growth. As a result, consumer staples have gotten the nod from many investors looking for stability in the current environment. After all, as we like to say, you still need to brush your teeth and do laundry no matter what the economy is doing.
But in that rush to safety, we may have pushed the sector too far.
Looking at yields and valuations, the consumer staples are now one of most expensive sectors on the market. And not all staples are performing equally in terms of earnings – even some of the most basic ones are struggling as consumers work from home and shelter in place.
This begs the question: is the sector still a safe one to own or have we placed too much on the stable plays in this pandemic? The answer may not be so simple.
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