In 2023, consumer staples stocks experienced a collective decrease of 6.5%, performing poorly compared to the broader market. This has led investors to be optimistic about the sector in 2024, as historically, a sector that underperforms one year often outperforms the next. However, short interest adds a twist that may continue to weigh the sector down, especially for certain consumer staples stocks that are being targeted by short sellers.
Short interest refers to the percentage of a stock’s float (the number of shares available to the public) that are being sold short. When shares are sold short, investors borrow and sell them with the hope that the share price will decrease before the borrowed shares are returned. Stocks with high short interest may indicate a potential downward movement in the near future.
It’s important to note that high short interest doesn’t guarantee that stocks will decline, but it does suggest that institutional investors have concerns about the stock. One such stock that short sellers are targeting is PepsiCo (NASDAQ: PEP). Despite beating bottom line expectations in every quarter of 2024, a slight miss on the top line caused a decrease in PEP stock. While the stock seems to have stabilized, short interest has risen by 6% in the last month, impacting the stock’s performance.
Out of the three consumer staples stocks identified, PEP stock appears to be the most promising investment due to the company’s strong dividend track record. PepsiCo is a dividend king that has consistently increased its dividend for 52 consecutive years.
It’s worth noting that the opinions expressed in this article are that of the writer, and the writer does not hold any positions in the securities mentioned. Chris Markoch, a freelance financial copywriter with over five years of market coverage experience, has been contributing to InvestorPlace since 2019.
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