There is plenty of uncertainty and unpredictability in the stock market these days. Investors looking to play defense against rising interest rates, elevated inflation and geopolitical uncertainty can always turn to the consumer staples sector for some solid recession-resistant investments.
High-quality consumer staples stocks produce household goods, food, beverages and other products that are always in demand and are not impacted significantly by economic cycles. These companies have predictable, reliable earnings, and many of them pay above-average dividends as well.
Here are eight of the best consumer staples stocks to buy in 2022, according to Bank of America (NYSE:BAC).
Walmart Inc (NYSE: NYSE:WMT)
Walmart is the world's largest discount retailer and grocery store chains.
Not only is the grocery business recession resistant to begin with, Walmart's position as the cheapest grocery destination means that it can even gain market share from higher-priced competitors during economic downturns. Analyst Robert Ohmes says Walmart is well-positioned in 2022 and is, in fact, gaining market share in the grocery business and has expanded its price advantage over competitors since the beginning of the pandemic. Walmart's investments in grocery delivery and pickup programs are also starting to pay off.
Bank of America has a Buy rating and a $190 price target for WMT stock.
Procter & Gamble Co (NYSE: PG)
Procter & Gamble is the world's largest consumer products company. Its top brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy, and Dawn.
Americans need diapers, detergent and toothpaste even during a recession, and analyst Bryan Spillane says the stock is an excellent defensive investment for anyone looking to add stability to their portfolio. Spillane says P&G has the potential for sustainable revenue beats and guidance hikes in coming quarters, and the stock also pays a 2.1% dividend.
Bank of America has a Buy rating and $180 price target for PG stock.
Coca-Cola Co (NYSE: NYSE:KO)
Coca-Cola is the world's largest and most recognizable beverage company.
Spillane says at-home beverage consumption and demand inelasticity will remain favorable for Coca-Cola in 2022, while a rebound in higher-margin away-from-home sales will boost profitability. Spillane says Coca-Cola should successfully navigate rising costs, but investors should anticipate gross margin contraction this year due to currency translation and dilution from Coca-Cola's BodyArmour acquisition. Still, Spillane is projecting about $10.5 billion in fiscal 2022 free cash flow and $4 billion in discretionary cash for targeted buyouts, dividend hikes or share buybacks.
Bank of America has a Buy rating and $70 price target for KO stock.
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Costco Wholesale Corporation (NASDAQ: NASDAQ:COST)
Costco Wholesale operates membership-based warehouse clubs that offer branded and private label grocery and other products.
Even without including gasoline sales, Costco reported a 12.7% gain in U.S. same-store sales in March. Ohmes says ancillary categories, including gas, food court, pharmacy and travel, have been particularly strong, up more than 50% in the month of March. He says higher gas prices are benefitting Costco traffic and membership growth, given its discounted prices. Like Walmart, Ohmes says Costco is relatively well-positioned in a high-inflation environment.
Bank of America has a Buy rating and $645 price target for COST stock.
PepsiCo, Inc. (NYSE: NASDAQ:PEP)
Soda drinkers may have strong opinions on Coke versus Pepsi, but Spillane says investors can't go wrong with either stock.
Unlike Coca-Cola, PepsiCo generates a significant amount of its total sales from outside its beverage business, including from its Frito-Lay and Quaker Foods subsidiaries. Spillane says supply chain bottlenecks are improving, and PepsiCo management has guided for sequential gross margin improvements throughout 2022, even in an environment of rising costs. He says PepsiCo has tremendous brand momentum, and it is capable of reaching the high end of its long-term financial guidance range.
Bank of America has a Buy rating and $190 price target for PEP stock.
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