Q1 Performance Review For The Consumer Staples Sector And Its Key Members

Includes: KO, PG, PM, WMT, XLP
by: Zvi Bar

The consumer staples sector is composed of companies involved in manufacturing products or providing services that are considered not very sensitive to economic cycles. Consumer staples include manufacturers and distributors of food, beverages and tobacco, producers of non-durable household goods and personal products, as well as consumer super-stores. Soft drinks make up the largest sub-industry within this sector.

The industries that make up the bulk of the consumer staples sector are considered relatively resistant to economic cycles because the general demand for their products or services is often not lessened by broader economic weakness. In fact, several industries within the staples sector could undergo increasing demand as the broader economy contracts. For example, a supermarket could benefit at the expense of its main products due to individuals trading down to generic versions that offer a lower price but potentially a higher profit margin to the store.

This is a review of the most heavily weighted companies within the consumer staples sector of the S&P 500. I have included the four equities that have a weighting of at least five percent of the sector. I have provided their present yields and sector weighting, as well as their 1-month, 2012-to-date and 1-year performance rates. The 2012-to-date rates are also performance rates for Q1.

Procter & Gamble Co (NYSE:PG): The Procter & Gamble Company is focused on providing branded consumer packaged goods to the world's consumers.

• Yield: 3.12%

• Sector Weight: 13.51%

• 1-month: 0.81%

• 2012-to-date: 0.75%

• 1-year: 9.1%

Philip Morris International (NYSE:PM) Philip Morris International engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States of America.

• Yield: 3.6%

• Sector Weight: 11.28%

• 1-month: 4.79%

• 2012-to-date: 12.91%

• 1-year: 35.0%

Wal-Mart Stores Inc (NYSE:WMT): Wal-Mart Stores, Inc. operates retail stores in various formats around the world, including hyper/mega-stores.

• Yield: 2.6%

• Sector Weight: 13.51%

• 1-month: 3.71%

• 2012-to-date: 2.41%

• 1-year: 17.57%

Coca-Cola Co (NYSE:KO): The Coca-Cola Company is the world's leading owner and marketer of nonalcoholic beverage brands and the world's largest manufacturer, distributor and marketer of concentrates and syrups used to produce nonalcoholic beverages.

• Yield: 2.9%

• Sector Weight: 11.28%

• 1-month: 6.98%

• 2012-to-date: 5.76%

• 1-year: 11.56%

The 41 companies that make up the consumer staples sector of the S&P 500 can also be tracked via the Consumer Staples Select Sector SPDR ETF (XLP), as well as several other tracking funds.

See a recent performance chart for XLP:

Through the first quarter of 2012, the consumer staples sector dramatically underperformed the S&P 500. In contrast to the 4.88 percent appreciation the XLP has seen so far in 2012, the S&P 500 has appreciated about 12.13 percent.

Several of these above-listed companies as well as many others within the sector have tremendous sensitivity to commodity costs, such as petroleum, aluminum and sugar, among others.
If such commodity costs were to spike upwards, these companies would be forced to raise prices

Opinions are likely to differ on the continued strength of name-brand options versus generic and private-label competing products as prices increase. Nonetheless, most of these well-known goods producers rely upon product quality and consumer loyalty to slowly increase market share over time and especially through market contractions.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice, as it does not take into account your specific situation or objectives.