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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.

Just Charts – Grinding Higher - 1

EVENTS THIS WEEK

6/25/14 GIS Earning Call 8:30am EST

6/25/14 TAP Analyst Meeting

6/26/14 PMI Investor Day 1

6/26/14 MKC Earnings Call 8:00am EST

6/26/14 CAG Earnings Call 9:30am EST

6/27/14 PMI Investor Day 2

XLP remains bullish on immediate term TRADE and intermediate term TREND durations from a quantitative set-up.

Just Charts – Grinding Higher - 1. xlp

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.

Just Charts – Grinding Higher - 1. consumption indi

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 20.0x)
  • Less sector Yield Chasing as Fed continues its tapering program
  • The high frequency Bloomberg weekly U.S. Consumer Comfort Index (rescaled for cosmetic and not component reasons) has not seen any real improvement over the past 6 months, but rose to 37.1 versus 35.5 in the prior week

Just Charts – Grinding Higher - 1. pe

Just Charts – Grinding Higher - 1.consumer comf

Just Charts – Grinding Higher - 2. us personal incfome

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).

Just Charts – Grinding Higher - a. bud

Just Charts – Grinding Higher - b. deo

Just Charts – Grinding Higher - c. ko

Just Charts – Grinding Higher - d. pep

Just Charts – Grinding Higher - e. gis

Just Charts – Grinding Higher - f. mdlz

Just Charts – Grinding Higher - g. kmb

Just Charts – Grinding Higher - h. pg

Just Charts – Grinding Higher - i mo

Just Charts – Grinding Higher - j. pm

Howard Penney

Managing Director

Matt Hedrick

Associate

Fred Masotta

Analyst