Why these consumer staples are out of favor among investors

Yahoo Finance editor-at-large Brian Sozzi breaks down a recent note from Sundial Capital Research which gets into how concerns over commodities inflation and slowing consumption by shoppers has led to consumer staples stocks really being out of favor among investors.

Video transcript

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JULIE HYMAN: Let's talk about one particular group that apparently has been overlooked, hated-- I don't know what you want to call it-- that Brian Sozzi is looking at and bringing up from the shadows. What is this group that we're talking about, Sozz?

BRIAN SOZZI: Beat down, clobbered, stomped on. You name it, Julie. That is the vibe right now in the consumer staples sector. And a good note in my box from the folks at Sundial Capital Research, noting that the percentage of consumer staples as a percentage of the S&P 500 is now below 6% for only the second time in 30 years. So what is essentially happening?

You've seen price pressure on consumer staple stocks, whether that is a food maker like a Coca-Cola or a consumer products maker like a Clorox, yet you've seen big-cap tech and other tech names gain a larger percentage of the S&P 500 because, by and large before this latest selloff, they've been doing quite well. But overall, you're just seeing a lot of these consumer products companies really be out of favor here. And I mentioned some in my piece right now on Yahoo Finance-- Campbell's Soup, Coca-Cola, Hormel, which makes Spam, Conagra Brands, which reported mixed earnings out this morning. Those stocks, on average, have fallen 10% over the past six months according to Yahoo Finance Plus data.

Now, over in the consumer products arena, Clorox shares are down 16% in the last six months. A large part of that decline came off their last quarter of earnings, which really shocked the heck out of Wall Street and was really, really quite disappointing here. Kimberly-Clark, which makes Kleenex, shares are down 5% in the past six months. Procter & Gamle, that stock has fared better. It's up 2% over the past six months, but it has lagged the S&P 500.

So I think it could be an interesting and somewhat disappointing look or consumer staples earnings season. I think the results you got out of from PepsiCo this week are going to be not the norm. That is the exception. For whatever reason, PepsiCo is having success, raising prices, seeing very strong demand for its beverages and snacks. That is not going to be the case for a lot of other players in this space.

JULIE HYMAN: Brian, doesn't Campbell's Soup make Goldfish?

BRIAN SOZZI: They do. And as we talked about and as our piece on the yahoo.com home page mentioned, Julie, Goldfish-- that business has helped their snack brand portfolio. But still, the soup business is dragging them down. Soup sales are slowing after that big stock-up trade last year. So mad love to Goldfish. I don't personally like them, but I respect the strong demand they are seeing in their business for whatever reason, like we talked about this week. Just not enough really to boost Campbell's top and bottom lines, and by extension, its stock price.

JULIE HYMAN: You know, it's interesting because many of these companies are raising prices. Conagra said that this morning. And so it is interesting that investors are not-- perhaps there's just not that confidence that they can raise prices enough to outpace the input costs that they are seeing, the rising input costs they're seeing.

BRIAN SOZZI: Julie, was what was fascinating when we talked to PepsiCo's vice chairman and CFO, Hugh Johnston, this week-- he basically said people are going to the supermarket right now and not really paying attention to prices. I know I would probably fall into that category. I go down to the supermarket aisles with my basket. I'm just buying things that I want.

You would be surprised how pennies-- or just how much more these big companies can make on every transaction just by raising the price of their products by $0.10. And that appears to be what's happening at some companies, and they're benefiting accordingly. But again, not every company is in the same position as a PepsiCo where you're leading in so many categories.

JULIE HYMAN: I mean, I pay some attention, but it's hard to avoid the increases we're seeing lately. I'm a private label girl, though. I have to say. I just buy the the generic store brand a lot of the.