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Everyone rotates in consumer staples stocks which should be a defensive sector as a shelter from high valuations in the tech sector. Since the PE ratio is the most accepted method for assessing the value of a stock, I'm giving an overview of the largest stocks in this sector.
I picked the 13 largest in the sector.
The average P/E ratio of the stocks listed here is approximately **31.36.**
Average PE ratio for all 245 stocks in sector (source StockAnalyisis.com) is 33,21.
Historically, the average P/E ratio for the U.S. consumer staples sector has generally hovered around **17x to 23x**.
|1|[WMT](https://stockanalysis.com/stocks/wmt/)|Walmart Inc.|45.03|
|:-|:-|:-|:-|
|2|[COST](https://stockanalysis.com/stocks/cost/)|Costco Wholesale Corporation|52.39|
|3|[PG](https://stockanalysis.com/stocks/pg/)|The Procter & Gamble Company|23.71|
|4|[KO](https://stockanalysis.com/stocks/ko/)|The Coca-Cola Company|25.86|
|5|[PM](https://stockanalysis.com/stocks/pm/)|Philip Morris International Inc.|25.66|
|6|[PEP](https://stockanalysis.com/stocks/pep/)|PepsiCo, Inc.|28.19|
|7|[UL](https://stockanalysis.com/stocks/ul/)|Unilever PLC|22.05|
|8|[BUD](https://stockanalysis.com/stocks/bud/)|Anheuser-Busch InBev SA/NV|21.98|
|9|[BTI](https://stockanalysis.com/stocks/bti/)|British American Tobacco p.l.c.|31.98|
|10|[MO](https://stockanalysis.com/stocks/mo/)|Altria Group, Inc.|16.00|
|11|[MNST](https://stockanalysis.com/stocks/mnst/)|Monster Beverage Corporation|46.00|
|12|[MDLZ](https://stockanalysis.com/stocks/mdlz/)|Mondelez International, Inc.|32.52|
|13|[CL](https://stockanalysis.com/stocks/cl/)|Colgate-Palmolive Company|36.24|
On the other hand, MSFT has a PE ratio of 25.3, Meta 23, Alphabet 29, Amazon 29, and they are growing like 15-20 percent per year.
So, given the history, quality and growth of these companies, how much cheaper do they actually need to be, comparing to Staples, to be fairly valued? Wall Street is currently telling us that these stocks are still expensive or in a bubble and that we should be moving into Staples which are trading at a PE of over 33. Does the market want MSFT, Meta and Alphabet to be at a PE of 18 to be fairly valued compared to Costco at PE 52, Pepsi at PE 29 or Colgate at PE 36.
This rotation has gone too far. If I buy Staples today I would not expect any decent return in the next 5 or 10 years. If I buy MSFT, Amazon, Meta or Google I would not get rich for sure, but I believe they will outperform Spy in the next 10 years, and it is ridiculous to consider these stocks to be in bubble territory while they are trading at valuations pretty much similar to their historical valuations. They are not cheap or bargain but calling it bubble is ridiculous.
Of course, PE is not the only relevant metric, but I only paid attention to it here.