Consumer Staples Best Ideas List Adjustments
JJSF: We are removing J&J Snack Foods (JJSF) from our SHORT bench. The stock hasn’t developed how we were expecting and we don’t anticipate anything happening in the near future that would entice us to make a definitive call. We will continue to watch the name from the sidelines.
9/16/15 UNFI | LOVE THE LONG THESIS
9/15/15 K | NICE MOVE, BUT NOT ENOUGH
GENERAL MILLS (GIS)
General Mills is reporting 1Q16 numbers tomorrow before the open, with a call at 8:30am ET. We are expecting to see sequential improvements in the business, especially within cereal. Moving past the sale of Green Giant, we are hoping to hear commentary surrounding M&A activity. Yogurt, grain snacks, and natural & organic will hopefully show strong growth and slight market share pickup. We are staying LONG into the quarterly earnings announcement, as General Mills remains one of our Best Ideas in the consumer staples sector. We will report back to you with a more robust note after their announcement.
Food and organic stocks that we follow outperformed the XLP last week. The XLP was up +0.2% last week, the top performers on a relative basis from our list were Dean Foods (DF) and Amira Natural Foods (ANFI) posting increases of +7.4% and +3.8%, respectively. The worst performing company on a relative basis on our list was Treehouse (THS), which was down -1.7%.
XLP VERSUS THE MARKET
The XLP has fared better than most other sectors in the YTD time period and as of late especially. In the last five trading days while the SPX was down -0.2% the XLP was actually up +0.2%, outperformed only by XLV (Healthcare) and XLU (Utilities).
From a quantitative perspective, the XLP is bearish on a TRADE and TREND duration.
Food and Organic Companies
Keith’s Three Morning Bullets
Dovish Fed = Oil, Gold, EM all up last wk; Rate Sensitive Stocks (Utes, REITS) outperformed big time too:
- DAX – the Fed’s Dollar Devaluation (EUR/USD +2.5% m/m) thing isn’t appreciated by either the DAX or Draghi (he testifies to European Parliament Wed); DAX down another -0.6% w/ keeping the crash (-20.4% since APR) in play, but signals immediate-term oversold here, for a trade
- OIL – Gold and Oil were +3.2% and +0.7%, respectively last week (vs. SPX -0.2%) and WTI is up another +1.5% to $45.34 this morning taking it to +5.7% in the last month (vs. SPX -6.6%) – is the new perma bull US stock market catalyst “higher gas prices”?
- YEN – signaled immediate-term TRADE overbought on Friday as the USD was signaling oversold (and Gold immediate-term overbought); the risk ranges in all of these big FICC trades (USD, Rates, Oil) are narrowing now (leading indicator for lower highs in volatility)
SPX immediate-term risk range = 1; UST 10yr Yield 2.11-2.21%
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