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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 – Kicking Off Earnings Season - 1

EVENTS THIS WEEK

7/21/14 CPB Investor Day 12:30pm EST

7/22/14 MO Earnings Call 9am EST

7/22/14 MJN Earnings Call 9am EST

7/22/14 KO Earnings Call 9:30am EST

7/22/14 KMB Earnings Call 10am EST

7/23/14 PEP Earnings Call 8am EST

7/23/14 TUP Earnings Call 8:30am EST

7/24/14 JAH Earnings Call 8:30am EST

7/24/14 HSY Earnings Call 8:30am EST

7/24/14 CCE Earnings Call 10am EST

7/24/14 DPS Earnings Call 11am EST

WEEK-OVER-WEEK PERFORMANCE

Consumer Staples fell -0.1% week-over-week versus the broader market (S&P500) up +0.5 %.  XLP is up 5.2% year-to-date versus the SPX at 7.0%.

Positive Divergence:  EL 2.1%; SMG 1.3%; KO 1.1%; CCE 0.9%; DF 0.9%

Negative Divergence:  NUS -10.6%; BNNY -6.6%; LO -6.6%; HLF -5.7%; RAI -5.0%

RECENT NOTES 

 

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

Just Charts – Kicking Off Earnings Season - 2

The Hedgeye U.S. Consumption Model shows 7 of the 12 U.S. Economic Indicators flashing green.

Just Charts – Kicking Off Earnings Season - 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, 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 19.6x)
  • 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 fell to 37.5 versus 37.6 in the prior week

Just Charts – Kicking Off Earnings Season - 4

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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 TREND w/ 109.97 support

Just Charts – Kicking Off Earnings Season - 7

DEO – bearish TREND w/ resistance = 126.49

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KO – bullish TREND support = 40.92

Just Charts – Kicking Off Earnings Season - 9

PEP – bullish TREND support = 86.88

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GIS – bullish TREND support = 52.39

Just Charts – Kicking Off Earnings Season - 11

MDLZ – bullish TREND support = 36.52

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KMB – bullish TREND support = 110.41

Just Charts – Kicking Off Earnings Season - 13

PG – bullish TREND support = 79.71

Just Charts – Kicking Off Earnings Season - 14

MO – bullish TREND support = 40.52

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PM – bullish TREND support = 84.15

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Howard Penney

Managing Director

Matt Hedrick

Associate

Fred Masotta

Analyst