Consumer staples stocks have been disappointing investors in 2024. Initially, there was optimism that consumer spending would increase due to interest rate cuts. However, with the likelihood of few, if any, cuts this year, it’s time to consider selling consumer staples stocks.
Inflation is also impacting the purchasing power of low- to middle-income consumers, leading to a lack of pricing power for many companies. Wealthier consumers are even turning to Walmart to stretch their dollars further. Therefore, it’s crucial for investors to focus on valuation during this time.
One consumer staples stock to consider selling is Clorox (CLX). Despite the belief that the stock’s decline is due to post-pandemic revenue normalization, the numbers don’t fully support this. While Clorox’s revenue has only decreased by about 3% compared to the previous year, the stock is struggling. With a high price-to-earnings ratio and some analysts giving it a strong sell rating, caution is advised.
Another stock to watch is Anheuser-Busch (BUD). Although consumers boycotted its Bud Light brand in 2023, the stock has shown resilience. However, the stock may have risen too quickly, leading to a high price-to-earnings ratio. With a significant amount of debt compared to cash on hand, the company’s balance sheet raises concerns.
Church & Dwight (CHD) is another stock to consider selling. While it has seen some growth in 2024, an increase in short interest has caused the stock to decline recently. The stock’s high forward price-to-earnings ratio suggests caution, especially without clear evidence of a market rally expanding to more stocks.
In conclusion, investors should be cautious with consumer staples stocks in the current market environment. Focusing on valuation and market trends is essential to making informed decisions about whether to hold or sell these stocks.