Just Charts: Sticking With What Works

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Consumer Staples traded in-line with the broader market last week, rising 0.9%.  XLP is up 2.8% year-to-date versus the SPX at 1.8%. The coming week is marked by a number of earnings releases.

Earnings Calls (in EST):

Monday (5/5):  TSN (9am)

Tuesday (5/6):  IFF (10am); HSH (10:30am); NUS (11am)

Wednesday (5/7):  BUD (9am); MDLZ (10am); TAP (11am and 2pm)

Thursday (5/8):  HAIN (8:30am); DF (9am); THS (9am); LNCE (9am); MNST (5pm)

 Friday (5/9):  POST (9am)

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

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The Hedgeye U.S. Consumption Model shows a muted outlook over recent weeks, with 6 of the 12 metrics flashing green (up from only 3 two week ago). 

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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 19.4x)
  • Less sector Yield Chasing as Fed continues its tapering program
  • The high frequency Bloomberg weekly U.S. Consumer Comfort Index (recently rescaled for cosmetic and not component reasons) has not seen any real improvement over the past 6 months, but improved to 37.9 versus 37.3 in the prior week

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Top 5 Week-over-Week Divergent Performances:


Positive Divergence:  ENR 17.3%; LO 8.6%; EL 4.7%; DPS 4.5%; HLF 3.7%

Negative Divergence:  AVP -8.6%; BG -6.1%; BNNY -4.5%; NWL -4.0%; BUD -2.6%

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 – stiff selloff on a bearish volume signal, but didn’t quite break 105.23 TREND support yet

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DEO – still bearish TREND (despite the entire world chasing low-beta consumer staple yield); TREND resistance = $125.33

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KO – slow-growth-yield-chasing remains in vogue; TREND support = $39.81

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PEP – low-volume ramp as of late, but the bullish TREND breakout remains intact with $84.18 support

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GIS – still one of the best looking charts on this list; bullish intermediate-term TREND support = $50.73

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MDLZ – held its recent breakout from its TREND base ($34.42 support)

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KMB – in spite of the scare a few weeks back, the stock has held $107.62 TREND support

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PG – correction late last week but still holding intermediate-term TREND support of $80.73

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MO – big bullish-yield-chasing remains a big time bullish TREND = $37.94 support

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PM – recipient of the style factors the market is paying for (big cap, low beta with yield); TREND support now $83.42

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Howard Penney

Managing Director

Matt Hedrick

Associate

Fred Masotta

Analyst