In some time, resources stocks will take a rest and there is nothing like being prepared for another industry that is set to shine. And although consumer staples companies lack excitement, they are showing signs of better performance in the months ahead.

These businesses tend to be steadier performers when business conditions turn adverse because they supply people with everyday needs such as food, drink and personal-care products.

For Canadian investors looking for investments in this slowdown-resistant part of the market, the problem is lack of choice and diversity within the sector. Consumer staples stocks constitute only a small part of the market — about 2.6% of the S&P/TSX composite index, with only 14 securities large enough to make the index.

On Wall Street, however, consumer staples stocks account for 9% of the market. There are 38 companies in the large-cap S&P 500 composite index alone. Elsewhere in the world, there are at least another 50 companies that can be considered “large-cap consumer staples.”

One indication of the market’s relative interest in consumer staples is valuation of the shares. In Canada, they are typically trading at low book-value multiples — mostly between two and three times.

This puts them solidly in the “value” section of the market, as opposed to the “growth” part. Keep in mind, though, that long-term investment results show tortoise-like value stocks winning the race over the more dazzling growth sector.

Profitability varies a good deal among consumer staples, but almost half the Canadian group produces double-digit returns on equity.

A positive feature is their free cash flow. Most Canadian consumer staples companies have cash left over after paying for capital investments. That gives them the opportunity to pay dividends (which most do), expand or go down the acquisition path.

The Canadian consumer staples stocks included in the accompanying table exclude supermarket chain Sobeys Inc., which parent Empire Co. plans to absorb, and George Weston Ltd., 62% owner of Loblaw Cos., which accounts for 80% of Weston earnings. This eliminates some double-counting.

The rest of the list shows representative international stocks from this sector, a sampling of issues trading at relatively low book-value multiples. These include two multinational giants, Nestlé SA of Switzerland and the Anglo-Dutch firm conglomerate, Unilever.

International shares are much more accessible now. Investors can buy into Unilever through one of its twin components, Unilever PLC of Britain or Unilever NV of the Netherlands. The British Unilever shares trade as American depositary receipts on the New York Stock Exchange, and the Dutch Unilever shares trade on the same exchange as ordinary shares. Shares of Nestlé trade on the SWX Swiss Exchange in Zurich and on various other European exchanges.

Unilever and Nestlé are the giants in this consumer staples stock sample. Unilever had sales last year of US$50 billion and Nestlé had sales of C$103 billion. Both are truly multinational businesses. Unilever brands in North America include Lipton, Becel, Ben & Jerry’s, Hellman’s, Slim-Fast, Dove and Pond’s. Similarly, Nestlé brands on this continent include Nescafé, Libby’s, Gerber, Carnation and Perrier.

Among the international stocks considered here, only two have Canadian equivalents. Safeway Inc. is a supermarket chain with almost 1,800 stores, some in Western Canada. Tyson Foods Inc., the world’s largest in this field, produces, processes and markets beef, pork and chicken, some in Canada.

The others offer exposure to sectors not directly available in Canada. For example, Minneapolis-based General Mills Inc. is a food processor that produces cereals, prepared meals, baking and snack products, and foodservice items. Brands include Betty Crocker, Pillsbury, Wheaties and Yoplait. In addition, Issaquah, Wash.-based Costco Wholesale Corp. operates the original chain of membership warehouse stores that compete strongly against Wal-Mart Stores Inc.’s entry. Costco is already heavily entrenched in the Canadian market.

One income trust shows up among the Canadian consumer staples stocks. This is Connors Bros., which trades only a trifle above book value. There is a reason for this. The trust’s 2006 cash flow of US$30 million came nowhere close to covering the US$61 million in outgoing dividends, especially after capital spending of US$6.6 million.

So, where did the money come from? The trust borrowed US$200 million by way of term notes. IE