Grading 3 Hottest Names in Consumer Staples as Sector Heats Up

Traders are always looking to get into a stock or sector during the early part of a bullish move. One way to accomplish this is to look to beaten-down sectors that are finally showing signs of life.

That’s exactly what is happening in the consumer staples sector, though this sector isn’t known for big, fast moves like various tech-related sectors.

Consumer Stocks Rally

Suddenly, over the past two weeks, consumer staples have come to life. One of the bellwethers for this sector is the Consumer Select SPDR ETF (XLP) .

XLP’s recent rally (shaded green) has pushed the ETF above its 50-day (blue) and 200-day (red) moving averages. It also occurred on a significant increase in volume (shaded yellow). 

Despite this rally, I wouldn’t be a buyer of XLP here. The recent performance of individual names in the consumer staples sector shows a lack of correlation.

Heinz in a Pickle

For example, on Wednesday, Kraft Heinz (KHC)  closed at its lowest level in nearly five years. Kraft Heinz fell 5.7% on Wednesday on rumors that Berkshire Hathaway (BRK.A)  could sell its shares of the Chicago-based food and beverage provider.

Kraft Heinz shares have lost over one-third of their value over the past two years:

The draw of this sector is that consumers tend to buy certain products regardless of economic conditions.

What are the hottest names in the consumer staples sector right now? Let’s go to the charts to find out.

1. Monster Beverage (MNST)

Monster Beverage  (MNST)  has been a monster winner for investors, gaining 65% over the past 12 months. The Corona, California-based provider of energy drinks closed at an all-time high on Wednesday.

In November, Monster exceeded earnings expectations by 17%, and beat revenue estimates by 4%. The company’s next earnings report is scheduled for February 26.

GRADE: A-

2. Colgate-Palmolive (CL)

Colgate-Palmolive  (CL)  hit a three-month high recently, and has managed to close above its 200-day moving average (red) for the first time in six months. Shares of the New York-based consumer products company have gained about 12% over the past two weeks. 

The company’s next earnings report is scheduled for January 26. Investors could either wait for that date to pass, or enter a small position and add additional shares afterward as appropriate. 

GRADE: B

3. Phillip Morris (PM)

This Connecticut-based tobacco company Phillip Morris  (PM)  has gained 36% over the past year. Last week, the stock reached its highest level since August. 

Phillip Morris is trading just below a major resistance level of $175 (point A). From there, it's a short journey to the stock’s lifetime high of $186 (point B). The stock’s current dividend yield is 3.5%. 

GRADE: B-

At the time of publication, Ponsi was long MNST, CL and PM.