By Ian Salisbury

With the market looking frothy, investors may want to check out stocks that tend to hold up in a selloff. Consumer staples shares, many of which boast attractive yields and valuations, could fit the bill.

Morningstar compiled a list of a dozen names in the sector that its analysts consider undervalued. "These companies provide goods and services that consumers will purchase and use regardless of whether times are good or bad," wrote Tori Brovet and Margaret Giles in a report Thursday.

The picks have a lot going for them. Most names will be familiar to investors and consumers alike, such as Campbell's, Kraft Heinz, and Clorox. All three have brands that have proven they can weather all kinds of economic climates.

What is more, almost all of the 12 stocks are trading at below the S&P 500's average forward price-to-earnings ratio of 22. A number of them boast attractive dividend yields, such as General Mills at 4.9% and Clorox at 4.1%.

The picks do involve risks, however. With the market on a hot streak, slow-and-steady consumer stocks haven't been much in fashion. While the S&P 500 has returned about 11% so far in 2025, the Consumer Staples Select Sector SPDR is up just 6.3%.

Many of these companies' troubles go beyond investors' preference for hot tech shares. They have struggled with tariffs, gloomy consumer sentiment, and penny pinching by shoppers burned by inflation. General Mills, Campbell's, and Constellation Brands are down by double-digit percentages so far in 2025.

Of course, those share price declines are an important reason the stocks showed as undervalued in Morningstar's screen. Brovet and Giles say they looked for companies with strong business "moats" -- the capacity to fend off competitors -- and big price discounts to Morningstar's fair value estimates.

Morningstar's 12 Undervalued Consumer Defensive Stocks

Heineken / HEINY

Dividend yield: 2%

Forward P/E: 15

Ytd. total return: 18%

Stock price: $41

Morningstar fair value estimate: $52.50

AmBev SA / ABEV

Dividend yield: 7.7%

Forward P/E: 13

Ytd. total return: 22%

Stock price: $2.23

Morningstar fair value estimate: $3.12

Kraft Heinz / KHC

Dividend yield: 5.7%

Forward P/E: 11

Ytd. total return: -7%

Stock price: $28

Morningstar fair value estimate: $51

Estée Lauder / EL

Dividend yield: 1.5%

Forward P/E: 43

Ytd. total return: 20%

Stock price: $91

Morningstar fair value estimate: $120

Constellation Brands / STZ

Dividend yield: 2.4%

Forward P/E: 12

Ytd. total return: -23%

Stock price: $168

Morningstar fair value estimate: $247

General Mills / GM

Dividend yield: 4.9%

Forward P/E: 14

Ytd. total return: -19%

Stock price: $50

Morningstar fair value estimate: $62

Fomento Economico Mexicano / FMX

Dividend yield: 2.3%

Forward P/E: 20

Ytd. total return: 6.5%

Stock price: $88

Morningstar fair value estimate: $103

Clorox / CLX

Dividend yield: 4.1%

Forward P/E: 20

Ytd. total return: -24%

Stock price: $121

Morningstar fair value estimate: $177

Brown-Forman / BF.B

Dividend yield: 2.9%

Forward P/E: 19

Ytd. total return: -17%

Stock price: $31

Morningstar fair value estimate: $42

Campbell's / CPB

Dividend yield: 4.7%

Forward P/E: 11

Ytd. total return: -19%

Stock price: $33

Morningstar fair value estimate: $62

Lamb Weston / LW

Dividend yield: 2.6%

Forward P/E: 20

Ytd. total return: -15%

Stock price: $56

Morningstar fair value estimate: $80

Boston Beer / SAM

Dividend yield: N/A

Forward P/E: 25

Ytd. total return: -27%

Stock price: $223

Morningstar fair value estimate: $304

Sources: Morningstar, FactSet

Write to Ian Salisbury at ian.salisbury@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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August 22, 2025 14:51 ET (18:51 GMT)

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