While the stricter definition of consumer stocks might only consist of consumer discretionary stocks, in this article, I will utilize the larger definition that is inclusive of both consumer staple and discretionary sectors. Generally, consumer staples include companies that sell essential goods and services such as food, beverages, and everyday household items. On the other hand, consumer discretionary stocks refer to items that are often wanted yet not necessarily needed by buyers.
These stocks are heavily dependent on interest rates and other macroeconomic factors. When the economy is performing well, spending on discretionary items goes up, while during an economic downturn, consumer staples tend to perform better. Even though consumer stocks have underperformed relative to other sectors like technology, there are still good reasons for investors to buy consumer stocks this summer especially considering the economic volatility that comes with an upcoming election later this year. Below are the three best consumer stocks to buy this summer to receive a good return in the future.
Walmart (WMT)
Walmart (NYSE:WMT) is a long-time defensive stock that has proven to be stable through different economic cycles. With over 10,000 stores in 24 countries, Walmart is both the largest retailer domestically and globally. Even though it already brings in the most revenue among retailers, there are reasons to believe that Walmart will continue to grow and dominate the industry.
Walmart’s most recent financial reports support this. In FY’25 Q1, revenue grew 6.0% year over year while operating income increased by 9.6% in the same time period. However, this was not what was most impressive about the earnings report. The eCommerce sales went up by over 20% globally last year, a very promising sign that Walmart has penetrated the online consumer market. This is especially important as retailers will gradually rely more on eCommerce, and eventually the future of the business lies in this field.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is the largest eCommerce company in the world, and that is not going to change for a while.With more than $350 billion in revenue last year, it is the second largest retailer worldwide just after Walmart.
While the stock itself is down, Wall Street analysts are still bullish on Amazon. This year’s “Prime Day” was the best in the company’s history. During those two days, American consumers spent 14.2 billion online shopping. While the exact second-quarter earnings are scheduled to come out this Thursday, analysts are estimating $148.68 billion in revenue, 11% up from the previous year.
Moreover, Amazon has been aggressively expanding its business beyond the eCommerce scope, including entertainment. Last week, Amazon signed a 11-year media rights contract with the NBA. Under this deal, Amazon Prime Video will cover games on Thursday nights, Fridays, and some games on Saturday games. There are still many growth catalysts going for Amazon, and investors should buy the stock this summer.
PepsiCo (PEP)
The last stock on this list is the well-beloved food and beverage company PepsiCo (NASDAQ:PEP). Pepsi has a diversified business model which makes it a stable stock for investors to buy. It covers a wide range of items including soft drinks, breakfast items, and snacks. PepsiCo is constantly expanding into alternative food options to meet the rising demand for health-conscious consumers. It acquired healthy brands like Naked and Health Warrior, which give the company an upper edge against its competitors.
In addition to the varied revenue streams, PepsiCo has been delivering stable and strong returns to investors. Thecompany raised its dividend payment by 7% last month which was the 52nd consecutive annual increase, and the current annual dividend yield stands at 3.13%. With a defensive business portfolio yet an expansion into new markets that could bring long term profit, PepsiCo presents an attractive buy opportunity for investors.
On the date of publication, Andy Kim did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a long position in AMZN.