To The Moon

🌟🌟🌟The US stock market soared in 2023 and 2024 especially for Big Tech stocks.  However they maybe overpriced.  Perhaps it is time  for the Consumer Staples to shine as  this sector underperformed the market in 2024.

$Consumer Staples Select Sector SPDR Fund(XLP)$ XLP only gained 7.5% in 2024, lagging behind the market.    XLP represents the largest and strongest Consumer Staples Giants in just 1 ETF.  These include companies in Food and Staples retailing, Beverage,   Food products, Tobacco, Household and Personal products.

The Top 10 holdings are Costco Wholesale, Procter & Gamble, Walmart, Coca Cola, PepsiCo, Philip Morris International, Colgate Palmolive, Altria Group, Mondelez, Target and Kimberly Clark.

The Top 10 weightage is 62%.  Total number of holdings is 40.  The expense ratio is a low 0.09% which is among the lowest among competing ETFs.  Dividends are paid every 3 months.  The current dividend yield is 2.78%.

In 2024, retail giant $Costco(COST)$  did very well as it is up 39%.  Costco operates a chain of membership only big box warehouse club retail stores.  It has a laser focus in giving its members the best possible prices on quality brands and merchandise.  

As of November 2024, Costco operates 890 warehouses worldwide with 616 warehouse in the US and Puerto Rico.  The rest are spread across Canada, Mexico, Japan, United Kingdom, South Korea, Australia, China, Spain,  France, New Zealand, Sweden and Iceland.

Costco has been growing consistently over the last 5 years and should continue to do so in the future.    Costco has grown 211% in the past 5 years and a massive 18,429% since its inception on December 5 1985.  Its IPO price was just USD 10 and fast forward 2025, Costco is now trading at USD 909.81 per share! 

Costco's competitor $Wal-Mart(WMT)$  also did very well in 2024.  Its share price is up a huge 69% in 2024.  Walmart operates a chain of hypermarkets, discount department stores and grocery stores in the US and 23 other countries.  

Walmart's business was resilient in 2024, generating solid revenue and profit growth.  There is a distinct possibility for Walmart to joo the USD 1 Trillion Club in 2025 based on its solid fundamentals , growth prospects and valuation. 

Walmart's recent acquisition of TV maker Vizio will allow it to access Vizio's SmartCast Platform which has more than 19 million activr accounts.  It gives Walmart the opportunity to expand its advertising business into streaming and bring in more sales. 

However other consumer staple stocks such as $Coca-Cola(KO)$  $Pepsi(PEP)$  Mondelez International and Target underperformed in 2024 and may now have more upside potential. 

XLP is trading at about 18.5 times earnings estimates for 2025.  This is below its 5 year high and represents a bigger than usual discount to the S&P500 's 22 times.  So there is greater room for upside in 2025.

Wall Street Analysts are bullish on XLP with a Buy rating,  Average Target price of USD 88.92.  That is an upside potential of 13%.

I like XLP as it offers value for money.  XLP also  does the heavy lifting for me by selecting the best consumer Staples Stocks and weeding out the non performing ones.  At the last closing price of just USD 78.37, it is a lot cheaper than say investing in Costco which is USD 909.81 per share. 

XLP   is a good defensive investment option in volatile markets with potential for growth and resilience during economic downturns.   This is because its holdings which offer products that are essential to our basic needs are expected to be consumed with more or less the same regularity.   So if there is recession or stagflation, XLP would be a good ETF to hold to weather the storm.

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