Regarded as defensive investments, consumer staples stocks are generally safe bets in choppy markets. On the other hand, they usually underperform during bull runs, and this paradigm has rung true over the past six months as the sector’s -4.1% decline paled in comparison to the S&P 500’s 7.1% gain.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one consumer stock boasting a durable advantage and two best left ignored.
Two Consumer StaplesStocks to Sell:
Boston Beer (SAM)
Market Cap: $2.13 billion
Known for its flavorful beverages challenging the status quo, Boston Beer (NYSE: SAM) is a pioneer in craft brewing and a symbol of American innovation in the alcoholic beverage industry.
Why Does SAM Worry Us?
- 1.7% annual revenue growth over the last three years was slower than its consumer staples peers
- Subscale operations are evident in its revenue base of $2.04 billion, meaning it has fewer distribution channels than its larger rivals
- Sales are projected to remain flat over the next 12 months as demand decelerates from its three-year trend
Boston Beer’s stock price of $194.98 implies a valuation ratio of 19.2x forward P/E. To fully understand why you should be careful with SAM, check out our full research report (it’s free).
BeautyHealth (SKIN)
Market Cap: $240.7 million
Operating in the emerging beauty health category, the appropriately named BeautyHealth (NASDAQ: SKIN) is a skincare company best known for its Hydrafacial product that cleanses and hydrates skin.
Why Do We Think SKIN Will Underperform?
- Sales trends were unexciting over the last three years as its 3.8% annual growth was below the typical consumer staples company
- Persistent operating margin losses suggest the business manages its expenses poorly
- 10× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
BeautyHealth is trading at $2.00 per share, or 14.9x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SKIN.
One Consumer Staples Stock to Watch:
Vita Coco (COCO)
Market Cap: $2.10 billion
Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ: COCO) offers coconut water products that are a natural way to quench thirst.
Why Is COCO on Our Radar?
- Products are flying off the shelves as its unit sales averaged 8.4% growth over the past two years
- Earnings growth has trumped its peers over the last three years as its EPS has compounded at 133% annually
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are growing as it capitalizes on even better market opportunities
At $38.91 per share, Vita Coco trades at 30.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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