Consumer staples stocks draw interest as investors rotate from tech

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Consumer staples stocks draw interest

Highlights

Consumer staples sector gains 11.4% in October, becoming the market's second-best performer as investors rotate away from tech, with Nasdaq-100 down nearly 7%.
Kimberly-Clark shares rise nearly 11% in October amid merger prospects with Kenvue, trading at under 15 times earnings and offering a 4.7% dividend yield.
Constellation Brands shares surge 20% in October, driven by 15% shipment growth in its wine and spirits division and strong market share gains in beer.

Defensive picks gain momentum

As reported by CNBC, Cramer says investors looking beyond the struggling artificial intelligence trade should consider consumer staples, after the sector rises 11.4% in October and becomes the market's second-best performer behind energy.

The Nasdaq-100, which tracks the biggest tech stocks, ends October down almost 7%, while the S&P 500 Equal Weight gains roughly 5% for the month. Cramer says investors need to follow the market's current leadership until issues weighing on the tech sector are resolved, adding that staples look like a better place to stay for now.

He highlights Kimberly-Clark as one of his preferred names, pointing to expected upside from its pending merger with Kenvue, whose brands include Tylenol and Band-Aid. He says the deal could produce efficiencies and create a stronger consumer products company; Kimberly-Clark shares gain nearly 11% in October, while the stock trades at less than 15 times earnings and offers a 4.7% dividend yield.

Cramer also says Procter & Gamble remains an attractive defensive holding after better-than-expected quarterly results last week and expresses confidence in new CEO Shailesh Jejurikar. Although Procter & Gamble shares rally 11% in October, he says he still prefers Kimberly-Clark because of its lower valuation and higher dividend yield.

Sector rotation supports staples outlook

Constellation Brands is another stock Cramer favors, saying the maker of Modelo and Pacifico is showing signs of a turnaround. Its core beer business is gaining market share, while its smaller wine and spirits division reports 15% shipment growth in the last quarter; the shares surge 20% in October, yet Cramer says the valuation, at roughly 11 times earnings with a dividend yield above 3%, still leaves room for value.

Among major soda makers, Cramer says Coca-Cola stands out after posting a strong quarterly report on Tuesday that is driven by higher volume rather than price increases. He also points to innovation in zero-calorie drinks and growth in protein offerings through the Fairlife milk business, while Coca-Cola shares rise 9% in October.

The broader market move suggests investors are rewarding companies with steadier demand and established household brands as volatility in high-growth technology names continues. For consumer staples companies, that rotation could support valuations and keep the sector in focus while investors look for shelter from weakness in the U.S. tech trade.

In our earlier article on the Nasdaq-100’s slide despite strong SpaceX results, we noted that tech stocks remained under persistent selling pressure even as AI optimism stayed intact. The index was trading below key short- and medium-term moving averages, with momentum indicators pointing to continued downside risk and markets watching whether support levels could hold as major tech earnings approached.

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