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Toothpaste, groceries, and household essentials may not be the most exciting stocks, but investors looking for safety may have made some of them surprisingly expensive.
According to Isabel Wang at MarketWatch :
Investors have been piling into companies that sell everyday necessities because demand for their products tends to hold up even when the economy slows. That popularity comes at a price. The sector’s reported price-to-earnings ratio , a common measure of how much investors pay for a company’s profits, has climbed above that of the technology sector. What’s surprising is that consumer-staples companies are generally expected to deliver slower earnings growth than tech companies. That means investors may be paying a premium for stability rather than growth. Our take? Even supposedly safe investments come with trade-offs. Consumer-staples stocks may offer you more stability, but that doesn’t necessarily make them better investments, particularly when their valuations are high.
This isn’t a new lesson. In the early 1970s, investors piled into the “Nifty ...