Consumer Staples Chris Ensign Sector Overview Sector Overview Sector weight for S&P Consumer Staples: 9.27% Con Discret
Con Staples
Energy
Financials
Health Care
Industrials
IT
Materials
Telecom
Utilities
Sector weight of SIM Consumer Staples: 9.16% Con Discret
Con Staples
Energy
Financials
Health Care
Industrials
IT
Materials
Telecom
Utilities
Industry Overview Key Players Performance YTD: 0.22% QTD: -­‐0.50% Business Analysis Demand and Life Cycle n  Non-­‐Cyclical / Defensive n  Demand remains constant through good and bad economies n  Consumers are unwilling or unable to cut consumer staple products from shopping n  Part of routine buying Demand and Life Cycle n  Predictable demand is easy for suppliers / producers to keep up with n  Large field diversified industries offers many investment choices n  Low Beta and steady dividends offer protection to portfolio Market Timing / Life Cycle n
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Mature products offer little growth opportunities Growth is often expansion in to new geographic territories or consolidation Competitive Analysis Threat of New Entrants Low •  Brand recognition is extremely important •  Must achieve large economies of scales •  Significant incumbent advantages Power of Suppliers Low Power of Buyers High •  Many suppliers compete for few large players •  Suppliers are generally more commodity based •  Little to no switching costs •  Buyers have many choices and frequent buying opportunities Intensity of Rivalry High Threat of Substitutes Low •  Little differentiation leads to price wars •  Insignificant innovation •  Established products and brands are ingrained in culture and lifestyle Economic Analysis Correlation to S&P Driving Factors n
Consumer Price Index Consumer Confidence Unemployment Commodity Prices Dollar Value n
Little relative exposure because of nature of products n
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Financial Analysis EPS versus S&P n  Lower but more consistent Profit Margin versus S&P n  Lower but more consistent Revenue per Share versus S&P n  Lower but more consistent Consumer Staple Data Valuation Analysis Absolute Data n
Sector is expensive relative to history High Low Median Current P/E 21.0575 11.4025 17.3768 20.3595 P/B 5.6351 2.7453 3.9841 5.6277 P/S 1.3674 0.6876 1.0627 1.3656 P/EBITDA 12.4163 6.0567 9.2320 12.2976 Relative to S&P n
Sector is similar to historical averages High Low Median Current P/E 1.2644 0.5872 1.0671 1.0819 P/B 1.9670 1.3332 1.6532 1.9293 P/S 1.0643 0.6943 0.7918 0.7247 P/EBITDA 1.6421 0.9784 1.2801 1.1982 Industry Comparison 1 Month 3 Month YTD P/E P/S Dividend Yield Consumer Staples -­‐1.25 -­‐0.50 0.22 25.29 1.35 2.72 Household & -­‐0.86 Personal Products -­‐3.63 -­‐8.05 24.33 2.77 2.90 Food, Beverage & Tobacco -­‐1.47 3.26 3.48 30.10 2.24 2.90 Food & Staples Retailing -­‐1.06 -­‐5.67 0.35 19.40 0.60 2.18 Recommendation Underweight n  Current P/E’s are expensive compared to historical averages n  No significant growth opportunities n  Consumer Staples creates important relative stability to portfolio Industry Recommendations n  Overweight Food & Staples Retailing –  Better value with lower P/E n  Underweight Food & Beverage and Household & Personal Products –  Higher P/E’s are too expensive for sector –  Strong USD is not attractive for exporting