Just Charts: Bullish Large Cap Charts

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: Bullish Large Cap Charts - 1

 

Consumer Staples was flat week over week versus the broader market (SPX) up 1.2%. XLP is up 3.0% year-to-date versus the SPX at 2.8%. 

 

Events This Week (in EST):

 

Earnings Calls

Wednesday (5/29): SAFM 11am

Wednesday (5/29):  BNNY 5pm

 

Citi Global Consumer Conference

Tuesday (5/28):  BUD (9:05am); BG (9:05am); THS (11:20am); JAH (11:20am); DEO (2:25pm); SAB (3:55pm)

Wednesday (5/29):  MDLZ (8am); NUS (1pm); HAIN (2:30pm)

 

Sanford Bernstein Strategic Decisions Conference

Wednesday (5/29):  CL (8am); KMB (10am)

Thursday (5/30):  MKC (8am); EL (11am)

 

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

Just Charts: Bullish Large Cap Charts - 2

 

The Hedgeye U.S. Consumption Model has shown steady improvement over the past three weeks, with 5 of the 12 metrics flashing green for the second week in a row.

Just Charts: Bullish Large Cap Charts - 3

 

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 19.6x)
  • 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, and fell to 34.1 versus 34.9 in the prior week

Just Charts: Bullish Large Cap Charts - 4

Just Charts: Bullish Large Cap Charts - 5

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Top 5 Week-over-Week Divergent Performances:


Positive Divergence:  DF 7.7%; POST 5.0%; LO 4.5%; REV 3.9%; HLF 3.6%

Negative Divergence:  SODA -7.6%; HRL -4.7%; TSN -2.9%; CPB -2.3%; FLO -2.1%

 

 

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 on almost every style factor that is working (big cap, slow-growth, etc.); TREND support = $105.87

Just Charts: Bullish Large Cap Charts - 7

 

DEO – recent bearish to bullish intermediate-term TREND reversal confirmed last week; TREND support = $125.28

Just Charts: Bullish Large Cap Charts - 8

 

KO – bullish on almost every style factor that is working; intermediate-term TREND support = $39.83

Just Charts: Bullish Large Cap Charts - 9

 

PEP – correction last week didn’t change the bullish intermediate-term TREND here – support = $83.87

Just Charts: Bullish Large Cap Charts - 10

 

GIS – still one of the best looking big cap slow-growth consumer names on my screens – TREND support = $51.72

Just Charts: Bullish Large Cap Charts - 11

 

MDLZ – correction last week came on no volume; bullish intermediate-term TREND intact at $35.45

Just Charts: Bullish Large Cap Charts - 12

 

KMB – stock has traded sideways for 3 months but remains a bullish intermediate-term TREND signal @Hedgeye with $108.09

Just Charts: Bullish Large Cap Charts - 13

 

PG – correction here looks more concerning than MDLZ or PEP as the TREND line is nearby at $80.13

Just Charts: Bullish Large Cap Charts - 14

 

MO – bullish TREND that holds most of the slow-growth-yield-chasing style factors the market is rewarding; TREND support = $38.61

Just Charts: Bullish Large Cap Charts - 15

 

PM – bearish to bullish TREND reversal confirmed again last week; intermediate-term TREND support = $83.48

Just Charts: Bullish Large Cap Charts - 16

 

 

Howard Penney

Managing Director

 

Matt Hedrick

Associate

 

Fred Masotta

Analyst


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