Fortifying Portfolios Against Tariffs: The Best Undervalued Plays in Consumer Staples and Utilities

As global trade tensions escalate and inflation looms, investors face a critical challenge: identifying companies that can weather tariff-driven headwinds while maintaining growth and profitability. The solution lies in strategic consumer goods and utility plays—firms with domestic supply chains, inelastic demand exposure, and the pricing power to offset rising costs. These companies are not just surviving—they're thriving. Here's why they should anchor your portfolio now.

The Tariff Inflation Tsunami: Why Traditional Plays Fail

Tariffs are no longer a temporary disruption. The U.S. has imposed a global 10% levy, with sector-specific rates as high as 245% on Chinese pharmaceuticals and 25% on Canadian/Mexican medical devices. For companies reliant on imported inputs, this translates to margin erosion, price hikes, and lost volume.

But not all sectors are equally exposed. Inelastic demand industries—like healthcare, utilities, and household staples—offer a shield. Consumers can't easily cut spending on medicine, energy, or cleaning supplies, even if prices rise. Pair this with domestic supply chains that bypass tariffs, and you've got a recipe for resilience.

Consumer Staples: The Undervalued Titans

Start with consumer staples, where Procter & Gamble (PG) and Church & Dwight (CHD) stand out.

Procter & Gamble (PG): The Pricing Power Champion

• Why It's Undervalued: PG's P/E ratio of 20.2x is nearly 20% below its 5-year average of 25.6x. Its dividend yield of 2.9% offers stability.
• Tariff Resistance: PG has shifted sourcing to U.S. facilities for brands like Tide and Gillette, reducing reliance on Chinese imports. This localization strategy kept its stock up 18% since tariffs intensified.

Church & Dwight (CHD): Essential Goods at a Bargain

CHD's products—Trojan condoms, Arm & Hammer baking soda—are non-negotiable for households. Even as costs rise, consumers won't cut back.
- Margin Resilience: CHD expanded margins by 14% in 2024, proving its ability to pass costs without losing volume.
- Valuation: At 22% gains in 2024, CHD trades at a P/E of 24.5x, still below its historical average and offering upside.

Utilities: Steady as She Goes

Utilities are a haven in volatile markets, with regulated revenue streams and NextEra Energy (NEE) leading the charge.

NextEra Energy (NEE): Green Energy's Pricing Power

• Domestic Dominance: NEE's wind and solar projects rely on U.S. manufacturing, avoiding tariffs on imported panels or turbines.
• Valuation: With a P/E of 23.4x and a 1.8% dividend yield, NEE is undervalued relative to its 8% annual EPS growth.

Healthcare: Navigating the Storm

Healthcare's vulnerability to tariffs is real, but Pfizer (PFE) and Eli Lilly (LLY) are reshaping supply chains to stay ahead.

Pfizer (PFE): Rebuilding the Supply Chain

• Reshoring Investments: PFE plans to cut tariffs by $7.2 billion through cost-cutting and U.S. manufacturing shifts.
• Valuation: PFE's P/E of 15.2x is a steal, especially with its 2.8% dividend yield and 28% stock growth since tariffs began.

Eli Lilly (LLY): Diversifying Sourcing

LLY is pivoting to India and the EU for APIs, reducing reliance on China. This strategy has kept its stock steady despite industry-wide volatility.

Why Act Now?

• Valuation Discounts: Staples and utilities trade at P/E ratios below historical averages (19.8x and 18.89x, respectively).
• Tariff Uncertainty: A federal court recently blocked the tariffs, but the Biden administration will appeal. Investors who act now can lock in gains if tariffs resurface.
• Dividend Safety: Utilities (e.g., Dominion Energy's 3.2% yield) and staples (PG, KO) offer income resilience.

The Bottom Line: Build a Bulletproof Portfolio

The tariff-driven inflation era demands defensive, high-quality equities. Companies like PG, CHD, NEE, PFE, and LLY combine domestic supply chains, inelastic demand, and undervalued metrics to offer a rare combination: growth with safety.

Investors who act now can capitalize on these bargains before the market catches up. The clock is ticking—act before these valuations normalize.

Disclosure: This analysis is for informational purposes. Always consult a financial advisor before making investment decisions.