2016 Consumer Staples?

[Kerim]

Are there any bright spots among the core consumer staples? Among the ones I follow, the lowest P/Es are 25, and I'm not really excited to buy at those prices.

In my scoring system, the highest-scoring consumer staple is CL, with a score of 59 out of 100. I put MKC and PEP in roughly the same tier as CL.

KO, CLX, DPS, PG are a rung down, in my opinion.

And GIS, K, and HSY are in the basement for me. (I still don't understand all the love for HSY, with its P/E in the 30s. Though I'd like to be converted.)

I want to add to my safest, core positions, but not at these prices. Are there any reasonably priced consumer staples out there at the moment?

(I suppose folks can argue about whether the tobacco companies are consumer staples. If you include them, MO would be my highest-ranked stock. But I already have a ton of it!)

[benjamen]

ADM, UL, and DEO come to mind.

[EricL]

(01-07-2016, 01:25 PM)Kerim Wrote: Are there any bright spots among the core consumer staples? Among the ones I follow, the lowest P/Es are 25, and I'm not really excited to buy at those prices.

In my scoring system, the highest-scoring consumer staple is CL, with a score of 59 out of 100. I put MKC and PEP in roughly the same tier as CL.

KO, CLX, DPS, PG are a rung down, in my opinion.

And GIS, K, and HSY are in the basement for me. (I still don't understand all the love for HSY, with its P/E in the 30s. Though I'd like to be converted.)

I want to add to my safest, core positions, but not at these prices. Are there any reasonably priced consumer staples out there at the moment?

(I suppose folks can argue about whether the tobacco companies are consumer staples. If you include them, MO would be my highest-ranked stock. But I already have a ton of it!)

I haven't updated analyst estimates on my watch list recently so this is going off of numbers from a couple of months ago, but here are the ones I'd say are trading at the most reasonable valuations.

ADM, CVS, FLO, HSY, MJN, WBA.

I think your numbers for HSY are off, they aren't trading anywhere near a high 30's multiple. Analysts are estimating $4.10 in EPS for 2015 and $4.40 for 2016, which gives a PE range of 19.5-20.9 at the current share price.

[Dividend Watcher]

Most of the staples I think you're going to have to wait for a real recession to get at good valuations. Frustrating, I know. MKC is the last one on my hit list that I'm interested in and I've given up hope until everything craters.

[rapidacid]

(01-07-2016, 02:33 PM)EricL Wrote: I think your numbers for HSY are off, they aren't trading anywhere near a high 30's multiple. Analysts are estimating $4.10 in EPS for 2015 and $4.40 for 2016, which gives a PE range of 19.5-20.9 at the current share price.

I think there's bad data out there for HSY. TDA has last 4 reported quarters total earnings at $4.08 / share but when I look at M* data I see the 2nd to last reported quarter at $-0.44 which aggregates to $2.31 for the same period ( all other quarter numbers are different from TDA too )

So, not sure what to believe but at $86.3 / share price the P/E looks to be between 21 and 37.

Fwd 2016 estimates I see $4.40 for a forward P/E of 19.6

I like CALM, INGR and MO moving forward in this sector

[crimsonghost747]

I don't think you can go wrong with CL. They got hit really hard by the currency, so that is one reason for the high PE. Now if the current situation is the norm or if the dollar is simply too strong... that's up to you to decide. But anyway, they are constantly increasing market share and coming up with new products that people are actually buying... I think the company had a pretty good 2015 and while the PE still looks quite high I think that it's not too expensive.

[Kerim]

(01-08-2016, 11:06 AM)rapidacid Wrote:

(01-07-2016, 02:33 PM)EricL Wrote: I think your numbers for HSY are off, they aren't trading anywhere near a high 30's multiple. Analysts are estimating $4.10 in EPS for 2015 and $4.40 for 2016, which gives a PE range of 19.5-20.9 at the current share price.

I think there's bad data out there for HSY. TDA has last 4 reported quarters total earnings at $4.08 / share but when I look at M* data I see the 2nd to last reported quarter at $-0.44 which aggregates to $2.31 for the same period ( all other quarter numbers are different from TDA too )

So, not sure what to believe but at $86.3 / share price the P/E looks to be between 21 and 37.

Fwd 2016 estimates I see $4.40 for a forward P/E of 19.6

I like CALM, INGR and MO moving forward in this sector

TDA must be using the "adjusted" numbers while M* is using the reported numbers. The Q2 2015 numbers were a reported loss of 47 cents per share, which included an "impairment" charge of $1.13 per share because:

Quote:Additionally, the company performed an initial assessment of the fair value of the Shanghai Golden Monkey (SGM) business as a result of several contributing factors. Thus far in 2015, SGM net sales and profitability have been significantly lower than initial expectations. In addition, as part of the ongoing integration process, the company has continued to assess the quality of SGM’s accounts receivable and existing distributor networks. As a result of this assessment, the company has recorded an initial non-cash goodwill impairment charge of $249.8 million, or $1.13 per share-diluted. The company expects to finalize its valuation assessment in the third quarter of 2015 and additional charges, including charges related to other long-lived assets, may be required. The company anticipates completing the acquisition of the remaining 20% of SGM in the fourth quarter of 2015, but the timing and terms will be informed by the results of the ongoing assessment.

I've complained before about how tough it is to nail down earnings. My shortcut is to discount "adjusted" numbers and stick with GAAP/reported because it is waaay simpler and some companies (I'm looking at you, JNJ) seem to have these adjustments all the freaking time. Yeah, maybe HSY is better than most, and maybe the Shanghai Golden Monkey debacle is really a rare misstep for the company, but even using the "adjusted" Q2 figure, I get a P/E of almost 24, even generously assuming they earn $1.00 per share in Q4. ($84.92/$3.58).

But even with that adjustment and assumption, the yield, payout ratio, earnings growth, and dividend growth underwhelm me.

I don't know. I do like the idea and story of HSY, and I am reall hankering for more consumer staple ballast to my portfolio. Perhaps if the price keeps falling, I'll reconsider. Thanks for the opinions! 

[Rasec]

It still puzzles me though, why Hershey's is considered Consumer Staples. If you ask me, if my family enters a recession, the first thing we'll cut is chocolates and alike, way before we cut on clothing...

Why the heck is Hershey's consumer staples and not consumer discretionary?

[Dividendsrule]

Also, HSY has a very small market cap compared to KO etc....so the thought is that there is more room for international expansion (as we see with the quest of the golden monkey).

I just nibbled on some GIS. I actually like the company a lot. I think they are positioning themselves very well for millennials. Larabars are delicious and all natural. They have organic products, they have a lot of new products coming out. It seems too me they are hustling a lot. I like that in my companies. I last bought a nice chunk at 51. I recently nibbled at around 55, because they probably will raise the dividend soon. So that puts the forward yield around 3.3% at least.

Otherwise I agree, not a lot of good deals out there except for WMT. Maybe PG a few bucks lower. They are all benefiting from lower energy costs so the stocks will also be up because of that. I'm waiting for a crash as well.

[Caversham]

(01-10-2016, 12:13 AM)Rasec Wrote: Why the heck is Hershey's consumer staples and not consumer discretionary?

I agree with this. I have trouble distinguishing between Staples and Discretionary. I don't eat chocolate and haven't had soda for probably 5 years, so I don't see how KO, PEP, HSY, etc are considered Consumer Staples. Whereas I probably buy a pair or two of jeans every year so I don't see how VFC is considered a Consumer Discretionary.

Speaking of VFC, it is starting to approach fair value. I will probably buy if it reaches the mid-to-low 50s.

I will probably buy PG if it reaches the low 70s.

[Kerim]

(01-10-2016, 01:36 PM)Caversham Wrote:

(01-10-2016, 12:13 AM)Rasec Wrote: Why the heck is Hershey's consumer staples and not consumer discretionary?

I agree with this.  I have trouble distinguishing between Staples and Discretionary.  I don't eat chocolate and haven't had soda for probably 5 years, so I don't see how KO, PEP, HSY, etc are considered Consumer Staples.  Whereas I probably buy a pair or two of jeans every year so I don't see how VFC is considered a Consumer Discretionary.

Speaking of VFC, it is starting to approach fair value. I will probably buy if it reaches the mid-to-low 50s.

I will probably buy PG if it reaches the low 70s.

To me, "staple" has less to do with how much you really need a thing (versus it being completely frivolous or unhealthy) than it is related simply to how likely people are to make regular, recurring purchases of the thing. Of course nobody needs a candy bar, but you can reliably count on frequent recurring sales. While it is easy to think of clothing more as a needed "staple," the fact that you're more likely to buy clothes than chocolate during a recession tells you little. Sure, we all make regular, recurring purchases of clothes, but not always from the same brands / stores / companies. I'm much more loyal to Snickers than to the Gap!

[Dividendsrule]

Come on now....Soda is so old hat for KO, do you buy Simply juice? Zico? Vitamin water? Pike's Peak Tea? Minute Maid?

I'm sure I'm preaching to the choir here...