Just Charts: The Slow Grind Continues

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 on any material changes.

Just Charts: The Slow Grind Continues - 1

Consumer Staples outperformed the broader market last week, rising 0.4% versus the S&P500 at -0.1%. XLP is up 1.9% year-to-date vs the SPX at 0.8%. The coming week is marked by a number of earnings releases.

Earnings Calls (in EST):

Tuesday (4/29):  ADM (9am); HLF (11am)

 

Wednesday (4/30):  ENR (9am); SAM (5am)

 

Thursday (5/1):  JAH (8:30am); AVP (9am); K (9:30am); CHD (10am); CLX (1:30pm); KRFT (5pm)

Friday (5/2):  NWL (8am); EL (9:30am)

For the last two months, XLP is bullish on immediate term TRADE and intermediate term TREND durations from a quantitative set-up.

Just Charts: The Slow Grind Continues - 2

The Hedgeye U.S. Consumption Model shows a muted outlook over recent weeks, with only 5 of the 12 metrics flashing green (up from only 3 last week). 

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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 19.1x)
  • 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, but improved to -25.4 versus -29.1 in the prior week

Just Charts: The Slow Grind Continues - 4

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Top 5 Week-over-Week Divergent Performances:


Positive Divergence:  SODA 8.3%; HLF 4.9%; MJN 3.1%; AVP 2.3%; MDLZ 2.0%

Negative Divergence:  HSY -4.2%; POST -3.2%; KMB -2.9%; BNNY -2.7%; HAIN -2.7%

Last Week’s Research Notes

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 – bullish beta chasing in low-beta-slow-growth (as a style factor) continues; TREND support = $104.79

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DEO – someone forgot to tell DEO about the style factor party; still bearish TREND w/ resistance = $124.76

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KO – big league bearish to bullish TREND reversal w/ TREND support now = $39.17

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PEP – bullish TREND remains intact = $83.63 support

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GIS – still one of the best looking bullish intermediate-term TRENDs on our quantitative signal = $50.11 support

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MDLZ – finally showing some separation (to the upside) from our TREND support line of $34.15

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KMB – in spite of this week’s correction, our intermediate-term TREND support line of $107.24 holds

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PG - bullish beta chasing in low-beta-slow-growth (as a style factor) continues; TREND support = $79.71

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MO – textbook bearish to bullish TREND reversal (in FEB 2014); TREND support = $36.97

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PM – grinding hard to earn the style factors the market is bucking up for – TREND line = $83.84

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Howard Penney

Managing Director

Matt Hedrick

Associate

Fred Masotta

Analyst