“A ‘bond-like’ 7% return…”

That’s what Palm Beach Letter (PBL) Chief Analyst Grant Wasylik just wrote about this month’s recommendation. Grant’s pick came from deep research into the 2008 financial crisis. While almost every single U.S. stock dropped like a rock during the crash, this company posted gains. In fact, it is one of only six public companies (out of 19,102 stocks) that has not posted a losing year in the last 10 volatile years.

If you’re wondering how this company could outperform, even when investors feared the world was ending… it was due to a simple but powerful combination: A world-class business in a recession-proof industry. The industry is “consumer staples.”

Consumer staples companies make the average (underperforming) investor yawn. These companies aren’t the darlings of the financial press. They don’t have flashy technology like Tesla. They don’t have wild growth projections like Uber (or whatever the next “great” tech startup will be). All they have is a simple, well-oiled, moneymaking machine. It’s why wise investors adore them.

Here’s what Grant wrote about consumer staples in this month’s issue…

 

James O’Shaughnessy, a former Bear Stearns executive and bestselling author of What Works on Wall Street: The Classic Guide to the Best Performing Investment Strategies of All Time, studied decades of historical market data. He concluded that consumer staples were the best stocks to own over the 41-year period (1968-2009) he tested.

This sector averaged compound annual returns of 13.6%. That beats the next best sector (financials) by 1.2% per year.

Food and beverage stocks have also outperformed the broader market over the last decade.

The Dynamic Food & Beverage Intellidex Index holds the top 30 U.S. food and beverage companies. It considers price, earnings, quality, management, and value. Over the last 10 years, this 30-stock food and beverage index has returned 160%, compared to the Dow’s 105%.

Why has food and beverage outperformed? Consumers buy their favorite food and beverage “staple” products in all economic conditions.

This is why investors buy this month’s recommendation in both bull and bear markets.

Remember, in 2008, the Dow fell 32%… the S&P 500 was down 37%… and emerging markets plunged 43%. Even some of the “safest” blue chips sunk that year: American Express (-63%), Apple (-57%), and General Electric
(-53%).

Only 25 stocks in the S&P 500 were able to generate a positive return that year… and this month’s PBL recommendation was one of them. It was up almost 10%. It’s a classic Palm Beach Letter investment.