To The Moon

Based on recent market analysis and reports as of late June 2025, there are two consumer staple giants that have been noted as potentially undervalued or oversold and could offer an interesting opportunity.

Two consumer staple giants currently flashing oversold signals with strong rebound potential are $Molson Coors(TAP)$ and $Constellation(STZ)$.

Constellation Brands (STZ): This alcoholic beverage titan has recently seen its shares plunge, leading to its Relative Strength Index (RSI) sinking to extremely oversold levels. Interestingly, Warren Buffett's Berkshire Hathaway has been reportedly adding to their position, which some investors see as a vote of confidence. The combination of an oversold RSI and institutional backing could suggest a potential rebound.

If we consider STZ, we are seeing RSI and also its share price dropping below the 26-EMA key level on the weekly timeframe, if we were to consider it without the oversold RSI and institutional backing, this stock would not be in my radar. But we could see a sharp rebound if the institutional backing going to come strong.

Molson Coors (TAP): The stock has plunged over 20% since April, driven by disappointing earnings. Its Relative Strength Index (RSI) has dropped to 19—its lowest since 2018—indicating extreme oversold conditions. Analysts remain bullish, with price targets ranging from $65 to $71, suggesting nearly 50% upside from current levels.

We are seeing TAP RSI at the 30 level on the weekly timeframe, with a declining weekly share price, we would not consider this stock based on how the bears are in control now, but normal when a stock recovering from extreme oversold conditions, we could be seeing a nice surge or even gap up for TAP.

Both companies are large-cap staples with solid brand portfolios, and their current technical setups could appeal to contrarian investors like myself.

What are the current market trends affecting consumer staples?

Consumer staples are navigating a complex landscape in 2025, shaped by both macroeconomic forces and evolving consumer behavior. Here are the key trends influencing the sector right now:

Resilient Demand Amid Economic Uncertainty : Despite global economic jitters, consumer staples remain a defensive stronghold. Their non-cyclical nature—covering essentials like food, beverages, and hygiene products—means demand holds steady even during downturns.

Shifting Consumer Behavior : Post-pandemic habits have solidified into long-term patterns. Consumers are trading down in some categories while splurging in others, driven by a heightened focus on value and convenience. This unpredictability is challenging traditional forecasting models.

Margin Pressures from Inflation and Input Costs : While companies have managed to pass on some costs, rising interest rates and slowing growth are squeezing margins. Revenue growth in the sector has decelerated from 9% in 2022 to around 3.7% in 2023, and that trend may persist.

Digital Transformation and E-Commerce Expansion : Brands are doubling down on digital marketing and online sales channels to meet consumers where they are. This shift is especially pronounced in emerging markets, where mobile-first shopping is booming.

Sustainability and Ethical Sourcing : Eco-conscious consumers are rewarding companies that prioritize sustainable packaging and ethical supply chains. This is no longer a niche concern—it’s becoming a competitive differentiator.

Currency and Tariff Headwinds : A strong U.S. dollar and new trade tariffs are creating challenges for multinational staples companies, particularly those with significant overseas revenue exposure.

While we are eyeing for July opportunities,the above trends could help us to identify which companies are adapting well and which might be ripe for a rebound. So I would also consider some consumer staples leaders that stand out.

Which companies are best positioned in the consumer staples sector?

Based on current fundamentals, market positioning, and adaptability to 2025 trends, here are several consumer staples leaders that stand out:

Procter & Gamble (PG) : A global titan in personal care and household products, $Procter & Gamble(PG)$ continues to lead with strong brand equity (e.g., Tide, Gillette, Pampers) and pricing power. Its focus on innovation and digital marketing has helped it maintain margins despite inflationary pressures.

Walmart (WMT) : As the world’s largest retailer, Walmart benefits from scale, supply chain efficiency, and a growing e-commerce footprint. $Wal-Mart(WMT)$ ability to offer value pricing makes it a go-to during economic slowdowns.

PepsiCo (PEP) and Coca-Cola (KO) : These beverage giants are navigating shifting consumer preferences by expanding into low-sugar, functional, and premium drink categories. Their global distribution networks and brand loyalty remain unmatched.

Costco (COST) : With its membership model and bulk pricing, Costco thrives on consumer loyalty and value-seeking behavior. It is also expanding internationally and investing in private-label growth.

Mondelez International (MDLZ) : Known for snacks like Oreo and Cadbury, $Mondelez(MDLZ)$ is capitalizing on the global snacking trend. Its exposure to emerging markets and focus on healthier product lines position it well for long-term growth.

Kimberly-Clark (KMB) and Colgate-Palmolive (CL) : Both companies are defensive plays with strong dividend histories and global reach in hygiene and oral care. They’re also investing in sustainability and digital transformation.

What do these valuation differences mean for investors?

One of the factors we might want to watch is the valuation differences.

Valuation differences in the consumer staples sector offer investors a roadmap for aligning our strategies with risk tolerance, income needs, and market outlook.

In this section, I will share what I found on how to interpret them

High P/E Ratios (e.g., Costco, Walmart)

These companies trade at a premium because investors expect strong future growth or view them as especially resilient. For example:

Costco’s P/E of 42.3 reflects its loyal customer base and international expansion.

Walmart’s 27.9 suggests confidence in its e-commerce and pricing power.

Implication: These are often seen as “quality at any price” plays. Suitable for growth-oriented investors willing to pay up for stability and innovation.

Moderate P/E Ratios (e.g., PepsiCo, Coca-Cola, PG)

These names offer a balance of defensive strength and steady income, with P/Es in the low-to-mid 20s and solid dividend yields.

Implication: Ideal for income-focused investors who want reliable cash flow with less volatility than high-growth sectors.

Lower P/E Ratios (e.g., Mondelez, Colgate-Palmolive)

These may signal undervaluation or slower growth expectations. But if fundamentals are intact, they can be attractive for value investors.

Implication: Potential for multiple expansion if sentiment shifts or earnings surprise to the upside.

Dividend Yield as a Valuation Anchor

In a high-rate environment, dividend yields become more important. Stocks with yields above Treasury rates may attract income seekers, while those with lower yields (like Costco) rely more on capital appreciation.

Since I am weighing July entries I think I could layer in forward P/E, free cash flow yield, or even compare them to sector ETFs.

Compare Valuation Of Consumer Staples Stocks Vs Sector ETFs

Another area we might want to consider is to compare the valuations of top consumer staples stocks to the major sector ETFs to see where the value—or premium—is concentrated:

The average P/E for sector ETFs hovers around 23, which aligns closely with names like PepsiCo (23.8) and Coca-Cola (24.1).

Costco (42.3) and Walmart (27.9) trade at a premium to the sector average, reflecting their growth and scale advantages.

Mondelez (21.7) and Colgate-Palmolive (23.2) are more in line with or slightly below ETF valuations, suggesting potential value plays.

So if you are looking for alpha beyond the ETF basket like myself, targeting individual names like Mondelez or Colgate could offer better entry points.

Summary

While we are considering which consumer staples stocks could be for short-term I think we need to consider some important points.

Oversold Indicators (like RSI): While an oversold RSI can suggest a stock is due for a bounce, it's not a guarantee. Stocks can remain oversold or continue to decline.

Analyst Ratings: Analyst ratings are opinions and should be considered alongside your own research.

The market is constantly changing. Economic factors, company-specific news, and broader market sentiment can all impact stock performance, this could give rise to market volatility.

Depending on our own portfolio and strategy, we need to consider Long-term vs. Short-term: Consumer staples are generally considered defensive stocks, known for steady, consistent performance and often good dividends, rather than explosive short-term growth. Their "skyrocketing" potential is relative to their typical growth profile.

Finally it is crucial to conduct our own thorough research and consider our own financial goals and risk tolerance before making any investment decisions.

Appreciate if you could share your thoughts in the comment section whether you think it is better to strike a balance to consider two consumer staples stocks (potentially upside short-term) with investing into sector ETFs.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.