iQ Consumer Staples Model
Consumer staples are essential products, such as food, beverages, tobacco and household items. Consumer staples are goods that people are unable or unwilling to cut out of their budgets regardless of their financial situation.
The consumer staples sector has outperformed all but one sector since 1962. Due to their low volatility, consumer staples stocks are considered to play a key role in defensive strategies. Buoyed by the persistent demand of it products, consumer staples companies generate consistent revenues, even in recessionary periods. As a result, consumer staples stocks decline far less during bear markets than stocks in other sectors.
RULES-BASED SELECTION PROCESS
The iQ Consumer Staples Model employs the following unemotional rules-based process:
Start with the largest 75 domestically-traded companies from the Consumer Staples sector
Select the 30 companies with the highest Operating and Dividend yields.
Screen by 3-year Seasonal Relative Strength and select the top 10.
This model reconstitutes every February, May, August and November
Why invest in Consumer Staples stocks
Investing in consumer staples stocks can provide several potential benefits, including:
1. Steady demand: Consumer staples companies provide products that are essential to daily life, such as food, beverages, household products, and personal care items. As a result, demand for these products tends to be relatively stable, which can make consumer staples stocks an attractive option for investors looking for defensive characteristics.
2. Recession resistance: Consumer staples companies are often considered to be less cyclical than other sectors, as people tend to continue purchasing essential products even during economic downturns. This can make consumer staples stocks an attractive option for investors looking to hedge against economic volatility.
3. Income generation: Many consumer staples companies pay consistent and reliable dividends, making them an attractive option for income-seeking investors.
4. Global exposure: Many consumer staples companies have a global presence, which can provide exposure to a range of economies and markets.
5. Brand power: Many consumer staples companies have strong brand recognition and customer loyalty, which can provide some level of competitive advantage and pricing power.
Consumer Staples Sector investments involve companies that produce essential goods and services, such as food, beverages, household products, and personal care items. While considered more stable during economic downturns, they may not experience significant growth during economic expansions. Investing in this sector carries inherent risks, including shifts in consumer preferences, competitive pressures, and regulatory changes affecting product pricing and distribution.