Just Charts - This Bud is for You!

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.

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Consumer Staples rose +0.4% week-over-week versus the broader market (S&P500) up +1.3%.  XLP is up 5.2% year-to-date versus the SPX at 5.5%.

EVENTS THIS WEEK

6/10/14 HAIN Piper Jaffray Consumer Conference 10:35am EST

6/10/14 REV Annual General Meeting TBD

6/11/14 BNNY William Blair Growth Stock Conference 9am EST

6/11/14 SMG William Blair Growth Stock Conference 3:40pm EST

6/12/14 JAH Annual General Meeting TBD

XLP remains 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 has shown steady improvement over the past month, with 5 of the 12 U.S. Economic Indicators 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 19.9x)
  • 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 rose to 35.1 versus 33.3 in the prior week

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TOP 5 WEEK-OVER-WEEK DIVERGENT PERFORMANCES

Positive Divergence:  HSH 10.6%; NWL 5.9%; SAFM 4.3%; NUS 4.0%; SJM 3.0%

Negative Divergence:  BNNY -14.1%; RDEN -8.7%; TSN -5.5%; LO -3.9%; FLO -1.7%

RECENT 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 – big cap-slow-growth-low-beta, this Bud is for you! #confirmed bullish intermediate-term TREND with $106.94 support

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DEO - #confirmed bearish to bullish TREND reversal still holding its head above $125.51 TREND support here too

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KO – bullish intermediate-term TREND intact with TREND support of $39.97

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PEP – breakout to higher-highs is always a thing of beauty – if only there was some volume behind this move; TREND support = $84.17

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GIS – since February 2014 this name has looked as good as any on this list; TREND support = $52.91

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MDLZ – signaling some exhaustion (overbought) to the upside, bullish TREND with $35.88 support, this remains

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KMB – one of the top names on this list for the last 6 months – no change on that front; TREND support = $108.16

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PG – worst looking name on the list; bearish TREND breakdown on an absolute basis ($80.73 TREND resistance)

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MO – big-cap-slow-growth-low-beta, yep. Bullish intermediate-term TREND support of $38.94 intact

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PM – same as the MO mo in all the aforementioned slow-growth #YieldChasing Style Factors; bullish TREND support = $84.71

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Howard Penney

Managing Director

Matt Hedrick

Associate

Fred Masotta

Analyst