LW – Lamb Weston remains at the top of our Best Idea Long list. We hosted a Black Book presentation on Friday. To view the replay CLICK HERE. The top questions we have received are: How could management misjudge demand by ~500M pounds? Will volumes grow next fiscal year? How much of a risk is the ERP implementation in the manufacturing plants?
WMT – Walmart is returning higher on the position monitor in light of heightened geopolitical risks for the stock market. Walmart’s size and defensive nature will appeal more in a less predictable environment.
COST - Costco is moving higher on the position monitor in light of heightened geopolitical risks for the stock market. Costco’s size and defensive nature will appeal more in a less predictable environment.
PM – Philip Morris International moves higher on the long list in conjunction with heightened political risks. Demand for nicotine will not fall in this environment and the company’s dividend may be more appealing. To view the Black Book presentation, CLICK HERE.
BUD – AB InBev moves up to a Best Idea short. A weaker Brazilian Real to the dollar will be a headwind. The company has now anniversaried the Bud Light marketing challenges. Comparisons are easiest now, but the market will realize that much of the share loss is permanent and not a multi-year tailwind. Constellation Brands and Molson Coors have both been positive about their shelf space gains.
SJM – J.M. Smucker moves up to a Best Idea short. The Hostess acquisition added new risks when momentum was strong in Pets and Uncrustables. Hostess may require more promotions and marketing than management initially budgeted. There is also concern about how much of the stranded overhead costs will continue from $.60 to EPS this year into the next fiscal year.
Our updated position monitor:
