Consumer Staples outperformed the broader market last week, rising +0.6% versus the S&P500 at -0.5%. XLP is down -0.5% year-to-date vs the SPX at +0.5%.
For a fourth straight week, the XLP is bullish on immediate term TRADE and intermediate term TREND durations from a quantitative set-up. This is a material shift as the sector traded bearish TRADE and TREND for the majority of the year-to-date.
The Hedgeye U.S. Consumption Model is also showing improvement, with 6 of the 12 metrics flashing green.
Despite an improved outlook for the sector, we continue to believe that the group is facing numerous headwinds, including:
- U.S. consumption growth is slowing as inflation rises, in-line with the Macro team’s 1Q14 theme of #InflationAccelerating
- The economies and currencies of the emerging market – once the sector’s greatest growth engine – remain weak with the prospect of higher inflation in 2014 eroding real growth
- The sector is loaded with a premium valuation (P/E of 19.4x)
- Less sector Yield Chasing as Fed continues its tapering program
- The high frequency Bloomberg weekly U.S. Consumer Comfort Index has not seen any real improvement over the past 6 months, and fell to -31.5 versus -29.0 in the prior week
Top 5 Week-over-Week Divergent Performances:
Positive Divergence: HLF 12.3%; NUS 10.7%; MKC 5.6%; DEO 5.3%; BUD 3.8%;
Negative Divergence: POST -10.6%; JAH -4.3%; HAIN -4.3%; BNNY -3.2%; SAM -3.0%
Last Week’s Research Notes
Food, Beverage, Tobacco, and Alcohol
In the charts below we look at the largest companies by market cap in the Consumer Staples space from both a quantitative perspective and fundamental aspect where we can offer one. As you will see over time, sometimes our fundamental view does not align with the quantitative setup (though not often).
BUD – finally recaptures the bullish TREND line of 103.44 support! We’ll see if it can hold the line and make higher-highs vs the 2013 yr end mark-up closing high
DEO – looks nothing like BUD; still bearish TREND despite last week’s rally; TREND resistance overhead at $125.91
KO – looks like DEO; bearish TREND resistance = $39.91
PEP – holds its newly established bullish TREND line of $81.48 support; rally has come on weak volume relative to the ramp in volume we saw when the stock broke down in early FEB
GIS – 3 consecutive weeks of a bullish TREND confirmed (with solid volume signals embedded in the breakout); TREND support = $50.74
MDLZ – still clinging (barely) to bullish TREND with that support line = $33.88
KMB – still the best looking name on this list – Bullish Formation with intermediate-term TREND support = $106.62
PG – looks nothing like KMB – bearish TREND intact with resistance = $80.63
MO – 3 straight weeks of confirmed bullish TREND breakout – volume signal not especially strong here but TREND support = $36.32
PM – trying hard to not make lower-lows, but that hasn’t changed that this remains a bearish TREND ($82.92 resistance)