Just Charts - Bullish Summer Charts

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 - Bullish Summer Charts - cc.z

EVENTS THIS WEEK

7/17/14 PM Earnings Call 9am EST

WEEK-OVER-WEEK PERFORMANCE

Consumer Staples rose +0.4% week-over-week versus the broader market (S&P500) down -0.9 %.  XLP is up 5.3% year-to-date versus the SPX at 6.5%.

Positive Divergence:  ADM 4.5%; SAFM 3.8%; TSN 3.0%; LO 2.5%; MO 2.5%

Negative Divergence:  SODA -7.8%; NUS -4.6%; SMG -4.1%; THS -3.4%; HAIN -2.8%

RECENT NOTES 

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 shows 6 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, Q2 2014 theme of #ConsumerSlowing, and Q3 2014 theme of #Q3 Slowing
  • 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 37.6 versus 36.4 in the prior week

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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 = 109.76

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DEO – bullish TRADE and TREND w/ TREND support = $124

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KO – bullish TRADE and TREND w/ TREND support = 40.72

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PEP – bullish TRADE and TREND w/ TREND support = 86.39

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GIS – bullish TRADE and TREND w/ TREND support = 52.13

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MDLZ – bullish TRADE and TREND w/ TREND support = 36.32

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KMB – bullish TRADE and TREND w/ TREND support = 110.02

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PG – bullish TRADE and TREND w/ TREND support = 80.29

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MO – bullish TRADE and TREND w/ TREND support = 40.28

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PM – bearish TRADE (86.77 resistance); bullish TREND (84.82 support)

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Howard Penney

Managing Director

Matt Hedrick

Associate

Fred Masotta

Analyst