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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 – Summer Swings - 1

EVENTS THIS WEEK

7/2/14 STZ Earnings Call 10:30am EST

WEEK-OVER-WEEK PERFORMANCE

Consumer Staples fell -1.2% week-over-week versus the broader market (S&P500) down -0.1 %.  XLP is up 3.9% year-to-date versus the SPX at 6.1%.

Positive Divergence:  THS 4.5%; BNNY 3.0%; CAG 2.8%; TSN 2.7%; KO 1.2%

Negative Divergence:  SODA -7.9%; PM -6.9%; LO -5.6%; MNST -4.7%; NUS -3.8%

RECENT NOTES 

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

Just Charts – Summer Swings - 2

The Hedgeye U.S. Consumption Model shows 5 of the 12 U.S. Economic Indicators flashing green.

Just Charts – Summer Swings - 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 19.9x)
  • 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, and remained unchanged at 37.1 versus the prior week

Just Charts – Summer Swings - 4

Just Charts – Summer Swings - 5

Just Charts – Summer Swings - 6

QUANTITATIVE SETUP

In the charts below we look at the largest companies by market cap in the Consumer Staples space from a quantitative perspective.

BUD – bullish TRADE and TREND w/ TREND support = 108.55

Just Charts – Summer Swings - 7

DEO – bearish TRADE and TREND w/ TREND resistance = 126.86

Just Charts – Summer Swings - 8

KO – bullish TRADE and TREND w/ TREND support = 40.22

Just Charts – Summer Swings - 9

PEP – bullish TRADE and TREND w/ TREND support = 85.61

Just Charts – Summer Swings - 10

GIS – bearish TRADE and TREND w/ TREND resistance = 53.61

Just Charts – Summer Swings - 11

MDLZ – bullish TRADE and TREND w/ TREND support = 36.25

Just Charts – Summer Swings - 12

KMB – bullish TRADE and TREND w/ TREND support = 109.41

Just Charts – Summer Swings - 13

PG – bearish TRADE and TREND w/ TREND resistance = 80.40

Just Charts – Summer Swings - 14

MO – bullish TRADE and TREND w/ TREND support = 39.67

Just Charts – Summer Swings - 15

PM – bearish TRADE (88.39 resistance); bullish TREND (84.72 support)

Just Charts – Summer Swings - 166

Howard Penney

Managing Director

Matt Hedrick

Associate

Fred Masotta

Analyst