Jamie Falcon, Dia Ganguly, Gregory Gerard
Agenda
•
•
•
•
•
•
Overview
Business analysis
Economic analysis
Financial analysis
Valuation analysis
Recommendation
Consumer Staples
Overview
Consumer Staples
Industries in Sector
• Food, beverages and tobacco and producers
of non-durable household goods and personal
products.
Consumer Staples
S&P 500 Sector Breakdown
Telecom Services
3.09%
Materials
3.67%
Utilities
3.38%
Consumer Discretionary
10.65%
Consumer Staples
10.64%
Information Tech
17.79%
Energy
12.68%
Industrials
11.26%
Health Care
11.71%
Financials
15.13%
Consumer Staples
SIM Sector Breakdown
Telecom Services
3.29%
Materials
3.10%
Dividend
Receivables
0.06%
Utilities
2.38%
Cash
5.98%
Consumer Discretionary
10.18%
Consumer Staples
10.27%
Information Tech
21.40%
Energy
10.33%
Industrials
9.90%
Health Care
9.74%
Financials
13.36%
Consumer Staples
SIM Analysis
S&P 500 Weight SIM Weight
Consumer Discretionary
10.65%
10.18%
Consumer Staples
10.64%
10.27%
Energy
12.68%
10.33%
Financials
15.13%
13.36%
Health Care
11.71%
9.74%
Industrials
11.26%
9.90%
Information Tech
17.79%
21.40%
Materials
3.67%
3.10%
Telecom Services
3.09%
3.29%
Utilities
3.38%
2.38%
Cash
0.00%
5.98%
Dividend Receivables
0.00%
0.06%
+/-0.47%
-0.37%
-2.35%
-1.77%
-1.97%
-1.36%
3.61%
-0.57%
0.20%
-1.00%
5.98%
0.06%
Consumer Staples
Price Returns By Sector
PRICE RETURNS BY SECTOR
Index
Name
Adjustment
Market Cap
Index
level
QTD
Energy
1,554,767.09
570.84
2.03% 12.65%
Health C are
1,394,711.76
407.11 -0.93% 11.60%
C ons Disc
1,278,803.02
318.48
0.19%
7.76%
C ons Staples
1,283,140.30
323.6
0.29%
6.60%
405,196.60
169.41 -0.36%
6.32%
1,326,994.78
315.62 -1.94%
4.81%
Utilities
Industrials
YTD
Materials
443,282.34
247.49
0.63%
3.29%
Info Tech
2,208,446.69
416.68
1.40%
3%
131 -2.49%
1.76%
Telecom Svc
Financials
363,010.55
1,759,417.45
199.93 -3.36% -6.91%
Consumer Staples
Top Performers by Market Cap
$200.00
$180.00
$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
Consumer Staples
Overview Recap
•
•
•
•
•
YTD it has outperformed the S&P 500 205 bps
Consumer Staples Market Cap $1,283,140.30
S&P 500 Market Cap- $12,017,770.58
S&P 500 Consumer Staples Weight 10.64%
SIM Consumer Staples Weight 10.27%
Consumer Staples
Business Analysis
Consumer Staples
Industry Overview
Consumer Staples
Phase of Life Cycle
• Mature Phase
• Some staples increase demand during slow
economic times
• Recently started to grow alongside concerns
of the economy’s growth
– Less sensitive to economic cycles
• Domestic retail revenue growth is expected to
remain modest
Consumer Staples
Phase of Life Cycle
• Margins are impacted by higher commodity
costs.
– Higher prices of raw materials
• Alternative Markets
– Healthier alternatives
– Emerging Markets
Consumer Staples
Porters 5 Forces
Threats of
New
Entry
Supplier
Power
Competitive
Rivalry
Buyer
Power
Threat of
Substitute
Consumer Staples
Porters 5 Forces
Force
Analysis
- Brand Equity
- Customer loyalty to
establish brands
- Large Economies of
Scale
Relavance
Threat of New
Substitutes
-Low switching costs
-Ease of substitution
-
Bargaining Power of
Buyers
- Many buyers
- Buyers have a lot of
power
- Buyer price sensitivity
-
Bargaining Power of
Suppliers
- Many supplier choices
- Low price
+
Competition of Rivals
- Many competitors but
few big players
- Brand equity is
important
+/-
Threat of New
Competitors
+
Consumer Staples
Sector Valuation
Consumer Staples
Economic analysis
Consumer Staples
Consumer Staples
Consumer Staples
• CS vs gas
Consumer Staples
Consumer Staples
Financial analysis
Consumer Staples
ROE
• Consumer staples over the past 10yrs have
had a higher ROE relative to the S&P 500.
Consumer Staples
Net Profit Margin
• Generally lower compared to the S&P 500
average but increasing
– Hypermarkets: 2%
– health retail: 4%
– Beverage: 19%
– Tobacco: 20%
Consumer Staples
2011
2010
2010
2010
2009
2009
2009
2008
2008
2008
2007
2007
2007
2006
2006
2006
2005
2005
2005
2004
2004
2004
2003
2003
2003
2002
2002
2002
2001
20.0000
18.0000
16.0000
14.0000
12.0000
SPCNS
10.0000
HYPMK
TBACO
8.0000
RTDRG
BEVGS
6.0000
4.0000
2.0000
0.0000
Consumer Staples
Growth
Consumer Staples
Debt
Consumer Staples
Wal-Mart
Coca Cola
CVS
Pepsi
Procter & Gamble
Kroger
Philip Morris
Costco
Debt to Capital
Ratio
36%
38%
31%
19%
47%
24%
57%
73%
15%
Interest Rate
Coverage
15.4
11.1
27
10.6
21.9
16.9
4.9
-
Consumer Staples
Beta
• Sector: .56
– Wal-Mart: .53
– CVS: .51
– Philip Morris: .70
Consumer Staples
Valuation analysis
Consumer Staples
Valuation analysis:
Consumer Staples (Absolute)
P/Trailing E = 16.3
P/Forward E = 14.8
P/Book = 3.5
P/S = .9
P/CF = 11.9
Consumer Staples
Valuation analysis:
Consumer Staples (Relative to S&P)
Consumer Staples
S&P
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
P/Trailing E
P/Forward E
P/B
P/S
P/CF
Consumer Staples
Valuation: Consumer Staples
(Relative to the S&P)
Consumer Staples
Valuation: Tobacco (Absolute)
P/Trailing E =15.8
P/Forward E = 13.7
P/Book = 11.2
P/S = 3.1
P/CF = 14.2
Consumer Staples
Valuation analysis:
Tobacco (Relative to S&P)
Tobacco
S&P
6
5
4
3
2
1
0
P/Trailing E
P/Forward E
P/B
P/S
P/CF
Consumer Staples
Valuation analysis: Drug Stores
(Absolute)
P/Trailing E =14.8
P/Forward E = 13.6
P/Book = 1.7
P/S = 0.5
P/CF = 10.2
Consumer Staples
Valuation analysis:
Drug Stores (Relative to S&P)
Drug Stores
S&P
1.2
1
0.8
0.6
0.4
0.2
0
P/Trailing E
P/Forward E
P/B
P/S
P/CF
Consumer Staples
Valuation analysis: Drug Stores
(Relative)
Consumer Staples
Valuation analysis:
Hypermarkets and supercenter;
discount and variety stores (Absolute)
P/Trailing E =14.6
P/Forward E = 13.4
P/Book = 2.6
P/S = 0.3
P/CF = 9.5
Consumer Staples
Valuation analysis:
Hypermarkets, Supercenters,
Discount Stores(Relative to S&P)
Consumer Staples
Recommendation
Business Analysis
• the current economic climate slowing has had the sector growing slowly
Economic Analysis
• High unemployment, favorable currency position, uncertain economy
Financial Analysis
• Decreasing ROE
• Net Profit Margin trending upwards, favorable debt positions, insensitive
to a bad market, sales growth, performs well in uncertain market
Valuation Analysis
• Price value ratios relatively inline with the S&P
• Current Position: Underweight -0.37%
• Recommendation: Overweight to 0.5%
Consumer Staples
What Questions Do You Have?
Consumer Staples