INVESTMENT IDEAS
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.
Consumer Staples rose +1.9% week-over-week versus the broader market (S&P500) up +1.6%. XLP is up 4.8% year-to-date versus the SPX at 4.1%.
EVENTS THIS WEEK
6/02/14 MNST Annual General Meeting 4pm EST
6/03/14 SAFM Stephens Spring Conference 9am EST
6/04/14 SAM Annual General Meeting 9am EST
6/04/14 BF/B Earnings Call 10am EST
6/04/14 TAP Annual General Meeting 1pm EST
6/05/14 RCO FP Earnings Call 3am EST
6/05/14 SJM Earnings Call 8:30am EST
XLP remains bullish on immediate term TRADE and intermediate term TREND durations from a quantitative set-up.
The Hedgeye U.S. Consumption Model has shown steady improvement over the past month, with 5 of the 12 U.S. Economic Indicators flashing green.
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 19.8x)
- 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 33.3 versus 34.1 in the prior week
TOP 5 WEEK-OVER-WEEK DIVERGENT PERFORMANCES
Positive Divergence: HSH 47.0%; SAFM 9.0%; TSN 8.5%; HRL 6.3%; REV 5.0%
Negative Divergence: SAM -3.5%; SODA -2.3%; TUP -1.0%; HAIN -0.7%; DEO -0.6%
RECENT NOTES
- BNNY: Still A Short, But On A Leash
- Protein Focus! M&A Activity Heating Up in the Food Business
- Just Charts: Bullish Large Cap Charts
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 intermediate-term TREND intact with @Hedgeye TREND support confirmed at $106.38
DEO – bullish intermediate-term TREND confirmed here as well with TREND support = $125.96
KO – slow-growth big-cap #YieldChasing remains in vogue; TREND support confirmed at $39.93
PEP – rip-roaring #YieldChasing fun last week with PEP breaking out on good volume after holding $84.82 TREND support
GIS – has been one of the best looking stocks on this list for all of 2014; overbought now but bullish TREND w/ $51.71 support
MDLZ – looks as good as it has looked now for the last 6 weeks; intermediate-term TREND support = $35.76
KMB – tested the bulls patience and held intermediate-term TREND support of $108.92 like a champ
PG – worst looking stock on the list but its bullish TREND too; intermediate-term TREND support near last price at $80.36
MO – got slow-growth #YieldChasing? Yep. Overbought last week but remains bullish TREND w/ support = $38.81
PM – bearish to bullish TREND reversal confirmed, big time, as slow-growth Style Factors dominate; TREND support = $84.68
Howard Penney
Managing Director
Matt Hedrick
Associate
Fred Masotta
Analyst
