Investors are currently enamored with technology stocks, particularly those that have exposure to the artificial intelligence (AI) theme. They are much less enthusiastic about consumer staples stocks, as shown by the 70-percentage-point performance gap that has occurred over the past three years. The S&P 500 index (^GSPC 1.10%) is up 75% over that time span, while the Consumer Staples Select SPDR ETF (XLP +0.01%) is up only 5%. If you're a contrarian, now is the time to consider doubling up on consumer staples stocks.
Why are investors avoiding consumer staples stocks?
There are very real issues to consider if you are looking at consumer staples stocks today. Two notable headwinds exist. First, branded food products are dealing with people who are increasingly worried about their budgets. That means pulling back on spending, with a simple solution being to switch to lower-cost consumer staples. For example, someone could buy premium toilet paper made by Procter & Gamble (PG 1.09%) or the lower-priced store brand. A person looking for a beverage could buy a Coca-Cola (KO +0.41%) soda, or just drink tap water.
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Additionally, there has been a shift toward healthier eating. Other factors are also at play, including the potential effect of GLP-1 weight loss drugs. Essentially, packaged food products appear out of step with current consumer eating habits.
Then there are the idiosyncratic risks involved with individual consumer staples brands. For example, PepsiCo (PEP 0.11%) has been lagging behind Coca-Cola in terms of performance. To put a number on that, PepsiCo's organic sales rose 1.3% in the third quarter of 2025, compared to a 6% jump for Coca-Cola. It isn't at all shocking that investors are avoiding the sector in favor of sectors, like technology, where financial results and news flow have been far more exciting.
There's nothing odd going on in the consumer staples sector
Here's the thing: People go through periods of belt-tightening from time to time. Consumer tastes are always evolving, and there are always some companies, even well-run ones like Dividend King PepsiCo, that end up struggling for a spell. After all, a company can't increase its dividend every year for 50-plus years without working through some tough times.
Over the long term, consumer staples makers adjust as needed to survive. However, there's an underlying strength to the industry. You won't stop eating, drinking, or using toiletries. It doesn't matter if there is a recession or if Wall Street is facing a bear market. The consumer staples sector is viewed as a safe haven for a very good reason: The sector is very resilient. When it falls out of favor, like it is today, contrarian investors should probably consider loading up.
The easiest way to double down on consumer staples would likely be to invest in an exchange-traded fund (ETF), such as the Consumer Staples Select SPDR ETF. With one investment, you get a diversified portfolio dedicated to consumer staples stocks. The expense ratio is a modest 0.08%, so it's also a fairly cost-effective way to invest in the sector. The ETF's 2.7% dividend yield will also be tempting to those with an income focus.
NYSE: KO
Key Data Points
If you prefer to buy individual stocks, you have lots of options. However, when an entire sector is out of favor, it's often a good time to look at the industry leaders. For example, as noted, Coca-Cola is performing relatively well right now despite the industrywide headwinds. Conservative investors might want to buy this Dividend King and its above-average 2.9% yield.
NASDAQ: PEP
Key Data Points
Value investors, meanwhile, might prefer PepsiCo. Yes, it's lagging, but it's one of the world's largest and best-run consumer staples companies. The Dividend King is highly likely to survive and thrive over the long term. However, if you buy it today, you can lock in a historically high 4% dividend yield. Notably, the company has made acquisitions over the past couple of years with the goal of updating its product portfolio to better align with consumer tastes.
NYSE: PG
Key Data Points
Procter & Gamble would be a strong option outside of the food space. The company manufactures paper products, cleaning supplies, and toiletries that generally sit at the high end of the segments they serve. It was able to grow organic sales by 2% in fiscal 2025 and maintained that growth rate in the first quarter of fiscal 2026.
In other words, it's holding its own during the industry's headwinds. That's not shocking, since brand loyalty tends to be fairly high when it comes to things like toilet paper, toothpaste, and deodorant. Notably, the company's volumes are holding up even as it continues to increase prices. Following a sell-off, P&G's 3% yield is near five-year highs.
Sometimes it pays to look past the leaders
Wall Street is a voting machine in the near term, favoring popular investments and popular investment themes. Over the long term, it tends to be a weighing machine, correctly recognizing the fundamental value of a business. Currently, investors are voting for tech stocks. Contrarians who think in decades, not days, will step back and see that unloved consumer staples stocks like Coca-Cola, PepsiCo, and Procter & Gamble may have more appeal than Wall Street is giving them credit for.
