Quick Read iShares Consumer Staples (KXI) returned 18.07% over the past year with lower volatility than the S&P 500’s 15.11%. Walmart and Costco represent KXI’s largest positions at 9.94% and 9.22%. KXI charges a 0.39% expense ratio versus XLP’s 0.08%. Nvidia made early investors rich, but there is a new class of 'Next Nvidia Stocks' that could be even better; learn more here. Consumer sentiment has been sitting in recessionary territory for months, with the University of Michigan's index at 56. ...

Core Insights - The Consumer Staples Select Sector SPDR Fund (XLP) focuses on essential goods, holding 99.3% of its portfolio in companies that produce groceries, household goods, and beverages, with net assets of $16.2 billion and an expense ratio of 8 basis points [2][3] Group 1: Fund Characteristics - XLP is designed for stability during economic uncertainty, featuring a 2.67% dividend yield and an 8% portfolio turnover, indicating a buy-and-hold strategy aimed at income generation rather than capital appreciation [3] - The fund allocates 28.73% of its assets to three major companies: Walmart, Costco, and Procter & Gamble, which dominate their categories and provide predictable cash flows [3] Group 2: Market Performance - Retail sales reached $735 billion in December 2025, growing 3.3% year-over-year, despite a pessimistic consumer sentiment reading of 52.9, indicating continued consumer spending on staples [4][6] - XLP has returned 15.2% year-to-date through February 13, 2026, outperforming its 12.9% one-year return, with Walmart achieving 20.2% year-to-date returns, Costco at 18.3%, and PepsiCo at 15.6%, while Procter & Gamble lagged behind [5][6]

Core Insights - Exchange-traded funds (ETFs) provide a means for investors to diversify portfolios and manage risks during economic downturns [1][2] - Consumer staples are identified as a resilient sector during recessions, historically outperforming other sectors [4][5] Investment Strategy - Long-term investors should prepare for volatility and consider exposure to defensive sectors, which can provide reliable passive income during recessions [3] - Allocating a portion of capital to defensive ETFs like the Consumer Staples Select Sector SPDR Fund (XLP) is recommended, especially as investors approach retirement [10][11] Sector Performance - Consumer staples have shown strong performance historically, with an average return of 14% in the 12 months preceding recessions and 10% in the 12 months following [6][5] - The sector has consistently outperformed others during recession periods since 1990, including notable economic downturns [5] ETF Details - The Consumer Staples Select Sector SPDR Fund (XLP) has a yield of 2.71% and a diversified investment across various consumer staples categories [7][8] - Top holdings in the fund include Walmart (11.05%), Costco Wholesale (9.33%), Procter & Gamble (8.18%), Coca-Cola (6.62%), and Philip Morris International (5.77%) [12]

Core Viewpoint - The Consumer Staples Select Sector SPDR Fund (XLP) is advised to be avoided as it has underperformed during a typically strong month for the sector, and its valuation appears high compared to growth prospects [3][4][5][8]. Performance Analysis - The XLP ETF has $14.94 billion in assets under management and has retreated 3.6% for the month ending November 18, resulting in a year-to-date loss of 2.7% and a 6.4% decline over the past six months [4]. - Historically, November has been the second-best month for consumer-packaged goods stocks, with a 70% win frequency over the past 20 years, making the current underperformance particularly concerning [5]. Valuation Concerns - Consumer staples stocks typically trade at higher multiples than the broader market, reflecting their above-average dividend yields and favorable volatility traits; however, some major staples are currently overvalued [8]. - Costco and Walmart, which together account for over 20% of the XLP portfolio, have higher valuation multiples than Nvidia, despite lacking comparable growth prospects [9].

Core Insights - The comparison between Vanguard Consumer Staples ETF (VDC) and Consumer Staples Select Sector SPDR Fund (XLP) highlights their performance, costs, and risk profiles in the U.S. consumer staples sector [1] Cost & Size - VDC has an expense ratio of 0.09%, while XLP has a slightly lower expense ratio of 0.08% [2] - As of October 27, 2025, VDC's one-year return is 0.2%, whereas XLP has a negative return of (2.5%) [2] - Dividend yield for VDC is 2.2%, compared to XLP's higher yield of 2.7% [2] - VDC has assets under management (AUM) of $8.5 billion, while XLP has a larger AUM of $16.4 billion [2] Performance & Risk Comparison - Over the past five years, VDC experienced a maximum drawdown of (16.54%), slightly worse than XLP's (16.29%) [3] - An investment of $1,000 in VDC would have grown to $1,344 over five years, compared to $1,268 for XLP [3] Holdings Composition - XLP is concentrated exclusively in the consumer defensive sector with 100% of its assets in this category, holding only 37 stocks [4] - VDC also skews heavily defensive at 98% but includes over 100 companies, providing broader representation and potentially reducing single-stock risk [5] Long-term Returns - Over the past decade, XLP delivered a total return of 99.6%, while VDC outperformed with a total return of 108.1% [6] - The S&P 500 index significantly outperformed both ETFs with a return of 290.8% over the same period [6] Dividend Growth - XLP's latest quarterly dividend payment increased by 46.3% over the past decade, outperforming VDC's dividend growth of 25.9% [8]

Core Insights - The consumer staples sector has remained relatively flat year to date, contrasting with a 15%-plus return for the S&P 500, making it appealing for value investors seeking passive income [1] - The sector includes a diverse range of companies such as household and personal products, retailers, grocery stores, food distributors, non-alcoholic beverages, tobacco, spirits, and consumer packaged goods [3] - Consumer staples tend to be resilient during economic downturns, as demand for essential products remains stable, although consumers may shift to generic brands to save costs [4] Sector Performance - Many leading companies in the consumer staples sector are facing low organic growth, declining sales volumes, and resistance to price increases due to consumers' focus on value amid rising living costs [5] - The sector has underperformed growth stocks in recent years, but low-cost sector ETFs provide an accessible investment avenue for those looking to capitalize on a potential recovery in consumer spending [8] Investment Opportunities - Consumer staples ETFs, such as the Consumer Staples Select Sector SPDR Fund and the Vanguard Consumer Staples ETF, offer a diversified investment strategy, allowing investors to benefit from a recovery in consumer spending while generating passive income [6] - The Consumer Staples Select Sector SPDR Fund, managed by State Street Global Advisors, has $16.1 billion in net assets, making it significantly larger than Vanguard's ETF and BlackRock's iShares U.S. Consumer Staples ETF, which has $1.3 billion [7]

Core Insights - Philip Morris International (PM) reported third-quarter 2025 results that exceeded Zacks Consensus Estimates for both revenue and earnings, reflecting strong growth prospects despite a recent stock correction [1][2] Financial Performance - Adjusted earnings per share (EPS) for Q3 2025 was $2.24, a 17.3% increase year-over-year, surpassing the Zacks Consensus Estimate by 6.67% [3] - Net revenues reached $10.8 billion, marking a 9.4% increase on a reported basis and 5.9% on an organic basis compared to the same quarter last year, with a positive surprise of 1.32% against the consensus estimate of $10.7 billion [4] - Operating income for the quarter was $4.3 billion, reflecting a substantial increase of 16.7% from the previous year [4] Product Shipment and Growth - Total shipment volume of cigarettes and smoke-free products grew by 0.7% year-over-year to 204.9 billion units, driven by a 91.0% increase in E-vapor shipments and a 16.9% rise in Oral smoke-free products [5] - The smoke-free business accounted for 41% of total net revenues, up 2.9 percentage points from the previous year, with a year-over-year growth of 17.7% in its top line and a 19.5% increase in gross profits [6] Future Guidance - For 2025, PM anticipates adjusted EPS in the range of $7.46-$7.56, indicating a growth of 13.5-15.1% from the previous year [7] - The company expects net revenues to increase by 6-8% on an organic basis and operating income to grow by 10-11.5%, alongside a projected smoke-free product volume growth of 12% to 14% [8]

Core Insights - Coca-Cola and PepsiCo reported strong third-quarter 2025 earnings, indicating positive trends in the consumer staples sector [1][2] - Both companies are adapting to changing consumer behaviors, focusing on affordability and health-conscious products [7][8] Coca-Cola Summary - Coca-Cola's third-quarter 2025 comparable earnings per share (EPS) reached 82 cents, a 6% increase year over year, surpassing the Zacks Consensus Estimate of 78 cents [3][4] - Revenues for Coca-Cola were $12.46 billion, reflecting a 5% year-over-year growth and exceeding the Zacks Consensus Estimate of $12.43 billion [4] - The company expects slight currency tailwinds for both revenue and comparable earnings in 2026, with minimal currency impact anticipated for fourth-quarter 2025 [5] PepsiCo Summary - PepsiCo's third-quarter 2025 net revenues were $23.94 billion, a 2.6% increase year over year, beating the Zacks Consensus Estimate of $23.87 billion [6] - Core EPS for PepsiCo was $2.29, surpassing the Zacks Consensus Estimate of $2.27, although it represented a 0.9% decline year over year [6] - PepsiCo is also maintaining its full-year outlook, indicating stability in its financial projections [6] Consumer Trends - Both Coca-Cola and PepsiCo are responding to price-sensitive and health-conscious consumers by offering smaller, more affordable packaging options [7] - Coca-Cola is seeing increased sales from dollar stores as low-income consumers cut back on spending [7] - PepsiCo is reformulating its snack products with healthier ingredients and reducing prices on multipacks and single-serve snacks to attract budget-conscious buyers [8] Investment Opportunities - Investors may consider ETFs that include Coca-Cola and PepsiCo, such as the Consumer Staples Select Sector SPDR Fund (XLP), Fidelity MSCI Consumer Staples Index ETF (FSTA), and Vanguard Consumer Staples ETF (VDC) [9]

Core Insights - Short interest on 24 out of 37 consumer staple stocks increased in August compared to the previous month, indicating a growing bearish sentiment among investors [2] - Conversely, short interest for the remaining 13 consumer staple stocks decreased, suggesting a more favorable outlook for those companies [2] Summary by Category - **Consumer Staples Sector Performance** - 24 out of 37 stocks in the Consumer Staples Select Sector SPDR Fund experienced a rise in short interest in August [2] - 13 stocks saw a decline in short interest, reflecting differing investor sentiments within the sector [2]

Core Insights - McDonald's $5 meal deal is becoming a significant macro hedge for investors amid rising grocery costs due to tariffs and global uncertainty, contributing to a nearly 5% stock price increase over the past month [1][2]. Sales Performance - The $5 meal deal has driven U.S. same-store sales up by 9% in Q2 2025, showcasing strong consumer demand for value amidst economic pressures [2][4]. Competitive Advantage - While competitors like Chipotle face challenges with rising prices, McDonald's is capitalizing on its recession-resilient brand, appealing to budget-conscious consumers and investors alike [3][4]. Economic Context - The timing of the meal deal coincides with the impact of tariffs, which are increasing costs for consumers, positioning McDonald's as a value leader in the fast-food industry [4][5]. Future Considerations - There are concerns that rising ingredient costs due to tariffs may affect profit margins, making the sustainability of the $5 deal a point of interest for investors, particularly ahead of the upcoming earnings call on October 29 [5]. Investment Strategy - Analysts suggest buying McDonald's stock under $275 to benefit from the value-menu trend, with additional opportunities in Yum Brands under $130 and the Consumer Staples Select Sector SPDR Fund for those looking to hedge against food inflation [6].