Soft Drinks
Underweight The S&P soft drinks index has been rallying for the past month after finding its decade low in mid-May. The rally appears to be driven by eroding fears of margin impacts from aluminum tariffs, demand destruction from higher prices to protect profits and general global trade…
Underweight Stocks in the S&P soft drinks index have been reeling in the last few trading sessions as fears the Trump administration’s proposed aluminum tariff will raise costs in an already-beleaguered industry. Despite Commerce Secretary Wilbur Ross’ comments that the cost increases would…
Underweight This summer, we downgraded the S&P soft drinks index to underweight based on a collapse in beverage shipments and its high correlation with relative performance. That decline has since accelerated but even lower volumes have not been enough to reverse the industry's price…
The U.S. Census Bureau released their factory shipments and inventories data and the message from beverage makers was bleak. The steep decline in shipments that started at the end of Q1 has accelerated and inventories have continued to pile up (second panel). This has driven the weakest industry…
Consumer staples equities in general and beverage stocks in particular have been stellar outperformers this year. Nevertheless, this strength may prove fleeting as our leading profit indicators have all taken a decisive turn for the worse. The biggest risk centers on weakness in beverage…
Highlights Portfolio Strategy The latest wobble in the financials sector is a buying opportunity, with the exception of the defensive insurance index. Our tactical overweight in utilities has played out. Take profits and downgrade to neutral. Weak beverage operating metrics argue for a…
Highlights Portfolio Strategy A window has opened up for utilities outperformance. Upgrade to overweight on a short-term (1-3 month) view. Leading indicators of beverage sales have improved, heralding an upgrading in depressed expectations. Stay overweight. The pullback in consumer finance…
The sudden economic exuberance following the Trump election victory has caused a flight out of traditional safe havens that looks to have gone too far. For instance, consumer products stocks (household products, beverages and packaged food) are now trading below the broad market P/E multiple, in…
Consumer products stocks are likely to move to an even larger valuation premium before the cyclical outperformance phase ends.
Beverage industry profit results have shown the negative impact of the previously strong U.S. dollar, causing some profit-taking in related shares. Nevertheless, underlying earnings fundamentals remain sound, and the currency should soon cease to be a drag. As a non-durable goods industry…