PUMMELED
I’m always amazed at the speed to which themes can become priced into certain sectors. Inflation/reflation rotation was in full force last week, with Food Retail (+7.1%) and Food Distribution (+10.1) being the only two sectors with positive performance last week.
The worst performing sector was Beverage & Alcohol, down -2.4% with MNST (-7%), CCE (-6.46%) and STZ (-4.51%). I guess it is going to be harder to get Corona over the new wall built on the Mexican border!
CALM up 12% could be seen as a beneficiary in the reflation trade too. The other protein processing companies declined last week. There is a compelling argument that a number of blogs are making that prices at the Georgia Dock are being manipulated, which could hurt SAFM, PPC and TSN. On top of that the Trump stance on trade policy & tariffs are seen potentially causing some problems.
Higher rates & strong dollar are a problem for most everyone in the space and will cause multiples to decline.
The Branded Package food stocks were broadly lower with THS (-8%) and PF (-6.5%) the two worst performing names. The THS debacle continues, and the PF acquisition story is losing some luster.
RECENT NOTES
11/11/16 BUFF | QUICK TAKE | 3Q16 EARNINGS NOTE
11/10/16 FLO | QUICK TAKE | 3Q16 EARNINGS NOTE
11/10/16 USFD | NEW BEST IDEA LONG
11/10/16 POSITION MONITOR UPDATE | NEW STARTING LINEUP (KR, COST, USFD)
11/8/16 FLO | 3Q16 SNEAK PEEK | OVERHANG OF LAWSUITS REMAIN
11/3/16 COST | OCTOBER SALES RESULTS
SECTOR PERFORMANCE
Food and organic stocks that we follow outperformed the XLP last week. The XLP was down 2.1% last week, the top performers on a relative basis from our list were United Natural Foods (UNFI) and Snyder’s-Lance (LNCE) posting increases of +12.2% and +9.2%, respectively. The worst performing companies on a relative basis on our list were Lifeway Foods (LWAY) and Treehouse Foods (THS), which were down -23.5% and -6.0%, respectively.
XLP VERSUS THE MARKET
Food and Organic Companies
Food Retail Companies
Food Retail stocks that we follow underperformed the SPX last week. The SPX was up +3.8% last week, the top performers on a relative basis from our list were Ingles Markets (IMKTA) and SUPERVALU (SVU) posting performance of +14.6% and +11.1%, respectively. The worst performing company on a relative basis on our list was Walmart (WMT), which was down -0.8%.
Beverage & Alcohol Companies
Beverage & Alcohol stocks that we follow underperformed the SPX last week. The SPX was up +3.8% last week, the top performers on a relative basis from our list were SODA and SAM posting increases of +32.5% and +6.8%, respectively. The worst performing companies on a relative basis on our list were MNST and CCE, which were down -10.8% and -10.3%, respectively.
Please call or e-mail with any questions.
Howard Penney
Managing Director
Shayne Laidlaw
Analyst
