Investors seeking alternatives to the struggling artificial intelligence trade should pivot toward consumer staples stocks, according to CNBC’s Jim Cramer.
Market Rotation and Sector Performance
The Nasdaq-100 index finished October with a decline of nearly 7% as investors moved their capital into defensive market sectors. Meanwhile, the S&P 500 Equal Weight index, which gives equal weight to all constituent companies instead of relying on market capitalization, advanced by approximately 5% during the month. The consumer staples index jumped 11.4%, positioning itself as the second-best performing sector following energy.
“You’ve got to take what the market is giving you, and until we sort out some of the issues for the tech sector, some other groups might be better bets for the time being,” the “Mad Money” host said. “I like the idea of camping out in the staples for a bit.”
Top Consumer Staples Recommendations
Cramer pointed to four distinct companies within the consumer staples sector, which consists of businesses offering essential household brands that consumers purchase regardless of broader economic conditions.
Kimberly-Clark, the manufacturer of Huggies diapers and Kleenex tissues, represents a recent addition to Cramer’s Charitable Trust portfolio managed by CNBC’s Investing Club. Cramer anticipates strong upside driven by its upcoming merger with Kenvue, the owner of brand names such as Tylenol and Band-Aid, expecting the transaction to produce operational efficiencies and form a major consumer products leader. Although Kimberly-Clark shares rose nearly 11% in October, the stock maintains a valuation below 15 times earnings alongside a 4.7% dividend yield. “I think the move is just getting started,” Cramer said.
Procter & Gamble continues to present a compelling defensive investment option following strong quarterly figures reported last week, despite the Investing Club having liquidated its long-held position in P&G in July. Cramer expressed trust in incoming CEO Shailesh Jejurikar as well. Procter & Gamble shares climbed 11% over the course of October, though Cramer favors the more affordable valuation and superior dividend yield offered by Kimberly-Clark.
Constellation Brands, producer of Pacifico and Modelo beers, displays positive indicators of a recovery. Its primary beer operations are expanding market share, while its compact wine and spirits segment achieved 15% shipment growth in the previous quarter. Shares of Constellation Brands jumped 20% in October, yet Cramer perceives ongoing value given the stock trades at roughly 11 times earnings and offers a dividend yield exceeding 3%. “It increasingly looks like the worst is behind Constellation Brands,” Cramer said.
Coca-Cola stands out as Cramer’s preferred choice among major beverage corporations. The company posted a robust quarterly report on Tuesday, supported by volume growth rather than price hikes. Cramer commended the firm’s product innovation in zero-sugar drinks and protein offerings through its Fairlife milk brand. Coca-Cola shares advanced 9% in October.
