After Costco's Surge, Here Are the 3 Best S&P 500 Stocks to Buy Now

The article highlights Coca-Cola, Dollar General, and TJX as defensive consumer stocks with stronger valuations than Costco, citing Coca-Cola's 23x forward P/E, Dollar General's 17x, and TJX at 31x. Coca-Cola stands out for 64 straight years of dividend increases, 2.8% forward yield, and 2026 guidance for 4% to 5% organic revenue growth and 7% to 8% earnings growth. Overall tone is constructive on resilient consumer names, but the piece is primarily comparative analysis rather than a company-specific catalyst.

Analysis

The market is rewarding defensiveness, but the more interesting signal is that investors are still paying up for certainty while selectively ignoring operating leverage. KO, DG, and TJX are not just “safer” alternatives to COST; they each monetize different forms of resilience — pricing power, localized necessity spending, and opportunistic inventory sourcing — which should matter more if consumer growth slows unevenly rather than collapsing outright. That makes this a relative-value rotation within consumer staples/discretionary, not a broad buy-the-sector call.

The second-order winner may be vendors and landlords tied to value retail, not the retailers themselves. If DG keeps remodeling and adding non-consumables, it can pull share from regional grocers, independents, and lower-income e-commerce baskets, while TJX’s off-price model can pressure mid-tier apparel chains by keeping liquidation channels efficient and discount expectations high. KO’s margin mix shift also implies continued low capital intensity, which should preserve buyback/dividend capacity even if volume growth is modest.

The biggest risk is that these “defensive” names are already crowded trades. If rates back up or the macro backdrop stabilizes, the market may rotate out of high-multiple defensives faster than fundamentals deteriorate, compressing multiples before earnings catch up. For COST specifically, the issue is not business quality but duration risk: at this multiple, even a small disappointment in comp traffic or renewal cadence can drive outsized de-rating over the next 1-3 quarters.

Consensus may be underestimating how much of the upside is now in expectations rather than operations. KO has the cleanest near-term setup because guidance supports earnings acceleration without requiring aggressive revenue upside, while DG is more of a multi-quarter repair story with idiosyncratic execution risk. TJX looks best if consumer stress persists; if spending re-accelerates, its relative outperformance could narrow because its scarcity/discount appeal is less differentiated in a healthier retail tape.

Key Decisions for Investors

• Long KO vs short COST as a 3-6 month relative-value pair: own the lower-multiple defensive compounder with dividend support; fade the multiple risk embedded in COST unless comps re-accelerate meaningfully.
• Add DG on weakness for a 6-12 month horizon: the setup is execution-driven, but the market is underappreciating the option value from remodels and non-consumables; keep sizing modest because turnaround sentiment can stay discounted longer than fundamentals improve.
• Use TJX as the highest-quality consumer downside hedge: long TJX into any macro softness, expecting resilience over the next 2-4 quarters as off-price demand captures budget-conscious trade-down behavior.
• For traders, sell upside calls on COST or run a call spread: implied quality premium is stretched, so capped upside makes sense unless you expect a surprise re-acceleration in traffic within one earnings cycle.
• If rates fall and defensives unwind, rotate from KO/TJX into cyclicals rather than doubling down on the trade: the main risk/reward is multiple compression, not balance-sheet stress.