Consumer staples are known for their stability during market volatility, as demand for essential goods remains consistent. With speculation around the Trump administration’s tariffs and potential price hikes, consumer-focused stocks, including traditional staples and other consumer-driven names, may look increasingly attractive.
As of February 4, 2025, the administration has instituted planned tariffs on Chinese goods but has held off for now on tariffs on products from Canada and Mexico. Though this has limited the impact of tariffs on consumer purchasing power in the United States, it remains to be seen whether the other tariffs will eventually come into play, as well as whether the administration may increase the tariffs over time. In any event, the market has been sufficiently spooked, dropping sharply in trading immediately following the planned implementation of tariffs before stabilizing.
Below, we examine three firms that may be stable alternatives to more volatile investments. Risk-averse investors might prefer a defensive strategy as 2025 continues, particularly if they feel more market shake-ups are in store.
Supply Chain Stability Strengthens Conagra’s Defensive Appeal
Conagra Brands Inc. (NYSE: CAG) is the company behind a host of packaged foods, with brands including Duncan Hines, Hunt's, Chef Boyardee, and Birds Eye. Conagra has attracted investors as a dividend stock, with an impressive yield of 5.57%, although its payout ratio of more than 137% may raise some concern over the sustainability of this payout rate going forward.
CAG shares have faltered by about 12% in the year leading to February 4, 2025, as sales disappointed. However, there are reasons to expect a turnaround in 2025: the company's market share is expanding as it continues to focus on the frozen foods segment, and shipping volumes have been improving. Organic net sales and volume both returned to gains in the most recent quarter, although each of these metrics rose by under 1% year-over-year.
Conagra's forward P/E ratio of 10.2 is considerably lower than its historical average, indicating that now might be a good time to buy while shares may be undervalued. Also, importantly for investors looking for a defensive play, the company has had plenty of time to ensure supply chain issues from recent years have been resolved.
A Balanced Perspective on WK Kellogg’s Growth Potential
WK Kellogg Co. (NYSE: KLG) is the portion of the legacy of Kellogg's business that is focused on cereal products in North America. In 2023, Kellogg's divided its operations across two companies; in addition to WK Kellogg, Kellanova (NYSE: K) took responsibility for snacks and goods in international markets.
With tariff uncertainty on the rise, WK Kellogg may be somewhat better insulated than Kellanova due to its limited geographic focus. Nonetheless, WK Kellogg has faced mixed sentiment from Wall Street analysts in recent months—TD Cowen recently downgraded the stock from Hold to Sell and lowered its price target, but Barclays moved in the other direction, for example.
There are concerns about the broader cereal market, including the potential for supply chain disruption due to climate change and other factors. However, in the latest quarter, five of WK Kellogg's six core brands—together accounting for about 70% of its sales—gained or maintained market share amid the company's improved in-store execution and targeted promotions, the latter of which has helped to offset price increases due to inflation in recent years.
Tilray’s Diverse Operations Could Help Weather Market Uncertainty
Tilray Inc. (NASDAQ: TLRY) is a cannabis, beverage, food, and wellness company headquartered in the United States but maintains an international presence. In the face of potential Canadian tariffs, Tilray's cannabis business would undoubtedly be impacted—although perhaps to a lesser degree than rivals in the cannabis space with operations exclusively in Canada. However, Tilray has repositioned itself in recent years as a leading craft beer company in the United States as well.
Should the administration's tariffs on Mexican products go forward, Modelo Especial would likely fall under the updated tariff guidelines. Given that Modelo has become the top-selling U.S. beer in recent quarters, this scenario might open opportunities for U.S. brewers, including Tilray.
To be sure, Tilray faces headwinds—little progress has been made toward broad cannabis legalization in the United States, for example—and the company's shares are trading close to a 52-week low. However, its diverse operations may position it to take advantage of tariffs, depending upon how the situation develops.
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