Until recently, consumer staples stocks had been popular with conservative investors. These companies make and sell products that are everyday essentials, which means their revenues and profits are fairly stable and quite predictable—a characteristic investors should like.
Of course, this type of company is not going to grow rapidly. But their ability to be “Steady Eddies” and grow modestly, while throwing off lots of cash flow, has enabled many of them to pay attractive and growing dividends to their shareholders.
These characteristics make these stocks a better alternative to owning bonds, since they have the bonus of a growing income stream rather than a fixed one.
So, let’s now take a closer look at one of these consumer staples stocks—a Warren Buffett favorite…
The company, Coca-Cola (KO), founded in 1892, has had to face up to many challenges in the economy over its long history.
Its current brand portfolio—which includes the iconic Coke, as well as Diet Coke, Sprite, Fanta, Schweppes, Dasani water, Innocent smoothies, Minute Maid juices, Costa Coffee and FUZE tea—has millions of loyal customers around the world who keep on buying these products again and again.
Yet, 2023 has been a very difficult year for the company’s investors. On a total return basis, the shares are down more than 11%. This compares with an 8.5% gain for the S&P 500 index. (Keep in mind that up until the start of this year, the stock had actually matched the cumulative performance of the S&P 500 for the previous four years.)
So, what’s gone wrong?
There are a few factors at play here. One is…
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