Consumer staples stocks usually provide protection when markets are frothy and ripe for a correction, but they’re a double-edged sword as they often lag in booming conditions. The industry has recently defied this pattern, however, delivering a six-month return of 10.3%, nearly mirroring the S&P 500.

Despite the attractive returns, investors should tread carefully. The low switching costs for everyday products mean that not all businesses are equally positioned for success. Keeping that in mind, here are two consumer staples stocks we think have durable advantages and one that may face trouble.

1 Consumer Staples Stock to Sell

Coca-Cola (KO)

Market Cap: $273.1 billion
Industry Segment: Beverages, Alcohol, and Tobacco

A pioneer and behemoth in carbonated soft drinks, Coca-Cola (NYSE:KO) is a storied beverage company best known for its flagship soda.

3 Reasons KO Worries Us

1. Overhead has increased over the last year as its operating margin fell by 4.1 percentage points
2. Free cash flow margin shrank by 15.2 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
3. Estimated sales for the next 12 months imply growth will decelerate from its three-year trend

Coca-Cola is trading at $63.36 per share, or 21.3x forward price-to-earnings. To fully understand why you should be careful with KO, check out our full research report (it’s free).

2 Consumer Staples Stocks to Buy

Monster (MNST)

Market Cap: $50.52 billion
Industry Segment: Beverages, Alcohol, and Tobacco

Founded in 2002 as a natural soda and juice company, Monster Beverage (NASDAQ:MNST) is a pioneer of the energy drink category, and its Monster Energy brand targets a young, active demographic.

3 Reasons MNST Will Outperform

1. Annual revenue growth of 11.7% over the last three years beat the sector average and underscores the popularity of its brand

2. Highly efficient business model is illustrated by its impressive 27.5% operating margin

3. Powerful free cash flow generation enables it to reinvest its profits or return capital to investors consistently, and its growing cash flow gives it even more resources to deploy

Monster’s stock price of $51.72 implies a valuation ratio of 28x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.

Celsius (CELH)

Market Cap: $6.87 billion
Industry Segment: Beverages, Alcohol, and Tobacco

With its proprietary MetaPlus formula as the basis for key products, Celsius (NASDAQ:CELH) offers energy drinks that feature natural ingredients to help in fitness and weight management.

3 Reasons We Love CELH

1. Impressive 77.4% annual revenue growth over the last three years indicates it’s winning market share

2. Incremental sales over the last three years have been highly profitable as its earnings per share increased by 198% annually, topping its revenue gains

3. Free cash flow margin grew by 7.5 percentage points over the last year, giving the company more chips to play with

At $29.24 per share, Celsius trades at 33.3x forward price-to-earnings. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More

The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.

Get started by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,704% between September 2019 and September 2024) as well as under-the-radar businesses like United Rentals (+564% five-year return). Find your next big winner with StockStory today for free.