Just Charts: XLP Marginally Outperforms S&P500

The table below lists our current investment ideas as well as a list of potential ideas we are in the process of evaluating (watch list).  We intend to update this table regularly and will provide detail around any material changes.

Just Charts: XLP Marginally Outperforms S&P500 - 1

Consumer Staples outperformed the broader market last week, falling -0.5% versus the S&P500 at -2.6%. XLP is down -0.5% year-to-date vs the SPX at -1.8%.

For a sixth straight week, 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.

Just Charts: XLP Marginally Outperforms S&P500 - 2

The Hedgeye U.S. Consumption Model shows a worsening outlook over recent weeks, with only 4 of the 12 metrics flashing green. 

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Despite the bullish quantitative set-up 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, and Q2 2014 theme of #ConsumerSlowing
  • 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 18.8x)
  • 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 declined to -31.9 versus -30.0 in the prior week

Just Charts: XLP Marginally Outperforms S&P500 - 4

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Top 5 Week-over-Week Divergent Performances:

Positive Divergence:  LVMUY 5.7%; ADM 3.2%; K 3.0%; DEO 1.8%; EL 1.8%

Negative Divergence:  HLF -9.9%; STZ -7.5%; HAIN -7.4%; DF -7.3%; JAH -6.1%

Last Week’s Research Notes

Earnings Calls This Week (in EST):

Tuesday (4/15):  NESN (2:30am); KO (9:30am)

Thursday (4/17): PEP (8am); PM (9am)

Quantitative Setup

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 – held its newfound bullish TREND this wk = $103.52 support

Just Charts: XLP Marginally Outperforms S&P500 - 7

DEO – still doesn’t look like BUD – bearish TREND resistance remains overhead at $127.42

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KO – bearish TREND resistance intact up at 39.39

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PEP – bullish TREND confirmed w/ $82.29 TREND support

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GIS – bullish TREND confirmed now for a month – support = $49.96

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MDLZ – hanging on to bullish TREND support of $34.07

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KMB – still the best looking long on this list; TREND support = $106.56

Just Charts: XLP Marginally Outperforms S&P500 - 13

PG – finally chases down the Yield Chasing style factor the market craves – what was TREND resistance of $80.51 is now support, but needs to hold to confirm

Just Charts: XLP Marginally Outperforms S&P500 - 14

MO – confirming the bearish to bullish TREND reversal now for a month w/

TREND support = $36.45

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PM – making a run (on no volume) at TREND resistance of $84.21 – must chase yield!

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Howard Penney

Managing Director

Matt Hedrick

Associate

Fred Masotta

Analyst