Three consumer staples to consider as the bear market doubles down

The stock market has fallen this year as investors switch from growth stocks to safer alternatives because of rising interest rates, soaring inflation, and the energy crisis. Investors are worried about a recession because the Fed has indicated additional rate hikes in the coming months. This is putting downward pressure on stocks. The S&P 500 is down 21% this year while the Nasdaq is down a staggering 25%.

Investors must diversify their portfolios during a bear market. As fear and uncertainty drive the markets lower, most investors shift to defensive stocks. Investors can limit the downside risk by allocating funds to stocks with stable earnings, such as consumer staples companies. Because these companies deal with everyday essentials such as food and beverages, personal care products, and household and home care products, consumer staples stocks act as a safe haven from uncertainty. These companies are regarded as noncyclical and can maintain stable growth generating significant profits even in weak economies as consumers rely on essential goods regardless of the state of the economy. And for that reason, these stocks provide investors with safety and defensive positioning during economic downturns.

As the bear market continues, we believe the following three consumer staples companies are among the best to consider.

Costco wholesale corporation

Costco is a membership-only retailer with 830 stores. The company operates in the United States and Puerto Rico, as well as Canada, Mexico, Japan, the United Kingdom, Korea, Taiwan, Australia, Spain, France, China, and Iceland. The company operates online stores in the United States, Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan, and Australia as well.

Costco boasts a loyal customer base with excellent customer satisfaction rates because of its membership program.  The company's global membership base consists of over 63.4 million paying customers. This massive subscriber base enables the company to buy large quantities of limited inventory and offer products in bulk at lower prices. The overall retention rate of 89.6% is a testament to the stickiness of Costco’s membership, and this is the biggest strength of the company that positions it to weather the impact of the upcoming recession.

Despite higher input costs and ongoing supply chain disruptions, Costco delivered strong financial results for the first quarter of 2022 that demonstrate the company is operating at full capacity. Costco's revenue increased 16% year-over-year to $52 billion, with cash and equivalents amounting to $11.2 billion. Costco's business prospects are excellent especially when inflationary pressures are causing consumers to cut back on spending elsewhere. With a distinctive membership-driven business strategy, Costco continues to be one of the top retail companies in the world. The company continues to report strong sales despite some margin pressure and is making efforts to retain and attract new members. With strong customer loyalty and pricing flexibility, Costco can weather the current challenging economic environment and reward investors handsomely in the long run.

PlantX Life Inc

PlantX is an all-plant-based product company based in Vancouver, Canada, promoting environmentally friendly and animal cruelty-free living. Through its e-commerce website and physical locations, the company provides over 5,000 vegan products as well as meal and indoor plant delivery services. This diverse range of plant-based/vegan products has resulted in significant financial gains for the company in recent quarters.

In March, the company generated $1.7 million in monthly gross revenue, a 28% increase over February 2022. The company is partnering with well-known e-commerce companies to bring the benefits of plant-based products to its customers. PlantX partnered with Instacart earlier this year to enable same-day delivery and strengthen its e-commerce capabilities. The company is also expanding its product lines to include cosmetics and clothing and has also introduced its very own water brand.

PlantX recently received approval to sell and distribute alcoholic beverages in its retail locations in Chicago, Illinois, and Venice Beach, California. On June 23, PlantX announced the expansion of its XMeals online platform to the United States. Customers can learn more about XMeals and order XMeals plant-based menu and meal programs through the new xmeals.com website. XMeals was launched in July 2021, and it provides both a subscription-based service as well as one-time purchase options from the company's weekly à la carte menu options. Subscribers can order weekly or monthly deliveries of at least three chef-curated meals. Customers can also choose from the company's 3 and 5-day meal plans, which feature nutritious plant-based breakfasts, lunches, and dinners curated by a registered dietician and Medical Advisory Board member.

PlantX is rapidly expanding in the plant-based industry, capitalizing on the industry's enormous growth potential by acquiring and partnering with celebrity chefs and established plant-based brands. With interest for plant-based products continuing to grow exponentially, PlantX seems well-positioned to grow in the coming years regardless of whether the U.S. economy goes into recession or not. With recent volatility, now may be a low point for the company which is primed for growth, thus providing a unique opportunity.

Bunge Limited  

Bunge Limited is an agribusiness and food company. The company’s agribusiness is involved in the purchase, storage, transportation, processing, and sale of agricultural commodities and commodity products. The company also sells vegetable oils and fats, including cooking oils, shortenings, and specialty ingredients. Bunge has over 69 refining and packaging facilities worldwide, as well as approximately 88 storage facilities. Further, through its Milling segment, Bunge sells wheat flour, bakery mixes, and corn-based products. Its Milling segment has over 23 milling facilities and over nine storage facilities around the world.

In May, Bunge announced to form a joint venture company named Bunge Chevron Ag Renewables LLC with Chevron Corporation (CVX) to meet the growing demand for renewable fuel feedstocks. The company recently acquired a 33% stake in Sinagro, a grain and agricultural products reseller based in Brazil. Bunge is an excellent stock in this inflationary environment because it operates in the agribusiness sector that is benefiting from all-time high prices for certain food items.

Conclusion

Investing during a bear market is not easy especially considering the possibility of a recession later this year. However, carefully placing bets on consumer staples stocks such as the ones introduced in this article could help investors navigate the rough seas successfully and see light at the end of the tunnel.