‘Bread and butter’ stocks – are WOW, WES and others in the staples sector a buy?

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There are only six stocks in the Consumer Staples sector of the ASX 100 - which are listed in the table - and there is only one more stock that makes the top 200 sector - that is, Goodman Fielder. I think all these companies are household names so I’ll not discuss what they do. Perhaps the only one that needs some explanation is Wesfarmers (WES) - let's refer to it as Coles - as it goes head-to-head with Woolworth's in its supermarket chain - but 'Coles' also has coal and industrial interests!

Sells goods we need, but do we need the stocks?

By its very name, staples, is a sector that produces goods we always need. The bread and butter stocks should not be expected to go through the price cycles that their cousins, Consumer Discretionary, go through - and certainly it’s not a sector that might be expected to swing through the big Resource sector cycles.

Coles and Woolworths are about the same size - as can be seen from the last column of the table. And these two companies account for over 80% of the weight for this sector in the top 200. Both pay reasonable dividends - WOW (4.5%) and WES (5.1%) and both have prices that have run hard over the last 12 months (24.0% and 24.6%).

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