Avoid consumer staples at current valuations
The bear case for consumer staples is that they are trading at historically high, unjustifiable multiples relative to high-growth technology peers.
The argument
The speakers highlighted that consumer staples are trading at 23.6 times forward earnings, which is on par with the Magnificent Seven (excluding Tesla). They argued that buying staples at an all-time breakout in multiples is a poor risk-reward trade.
The thesis, stress-tested
✓ What validates it
- ✓Staples sector forward P/E ratios begin to contract back toward historical means
- ✓Earnings growth for major staples fails to justify the 23x+ multiples
▸ Risks discussed
- ▸Costco's high multiple may distort the sector average
- ▸Staples could continue to re-rate higher if defensive flows persist
Hear it yourself
"So right now, Staples are 23.6 times earnings versus Mag seven. Forward. Like, come on. Pulling Tesla out 23.5 times. So now you're buying Smucker. What's in this, Coke, Pepsi, Colgate?"
00:00 / 00:14
AFFILIATE LINK · ZORTIX MAY EARN A COMMISSION · NEVER A RECOMMENDATION TO TRADE