1. Sector Presentation Consumer Staples
Jarred Blumensheid, Jordan Buchanan, Ken Bickle, Chris Bartkowski
Student Investment Management
Summer 2017

2. Agenda Overview Business Analysis Economic Analysis Financial Analysis
Valuation Analysis
Recommendation

3. Overview Consumer Staples: Accounts for 9.37% of the S & P 500.
Sixth largest sector in the S & P 500 by weight.

4. Industries in Sector Industries in sector: Sub-industries in sector:
Beverages
Food and Staples Retailing
Food Products
Household Products
Personal Products
Tobacco
Sub-industries in sector:
Agricultural Products
Brewers
Distillers & Vintners
Drug Retail
Food Distributors
Food Retail
Household Products
Hypermarkets & Super Centers
Packaged Foods & meats
Personal Products
Soft Drinks
Tobacco

5. Breakdown of Sector

6. Largest Companies in Sector
Name
Ticker
Market Cap
Wal-Mart Stores Inc
WMT
228.14B
Procter & Gamble Co PG
222.90B
Coca-Cola Co KO
191.62B
Philip Morris International Inc PM
182.42B
PepsiCo Inc
PEP
164.98B
Altria Group Inc MO
143.85B
Kraft Heniz Co
KHC
104.28B
Reynolds American Inc
RAI
92.77B
Walgreens Boots Alliance Inc
WBA
83.80B
CVS Health Corp
CVS
81.97B

7. Sector Performance Performance of Sector: Year to Date:
Currently under- performing the S &P 500 YTD.
S & P 500: 8.08%
Con Staples: 6.36%
Quarter to Date:
Currently under- performing the S & P 500 QTD.
S & P 500: 3.34%
Con Staples: 0.61%

8. Sector Performance Comparison

9. Business Analysis Phase of Life Cycle:
As of June 2017, currently in expansion phase
Entered in 2009
In Expansion Phase, economy grows at healthy 2-3% and stocks enter a bull market
However, as Consumer Staples typically under- perform during the expansion phase, it may be better to seek riskier investments with higher returns

10. Sensitivity To Business Cycles
Considered a defensive sector that, on average, has a lower beta than the overall market (<1)
Customers are less likely to eliminate this products from their budgets during any phase
Good dividend source

11. Porter’s 5 Forces Analysis
HIGH
Little to no cost to switch brands
Sensitive to price changes
LOW
Large capital investment to enter market
High economies of scale and low margins
LOW-MODERATE
Depends on the industry, but most products are highly demanded
LOW
Lots of potential suppliers
Not able to consistently raise prices
HIGH
Large number of competing companies
Low product variation/differentiation

12. Key Data Measures Consumer Price Index Unemployment Rate
Consumer Sentiment
Commodity Prices
Foreign Exchange Rates

13. External Factors
Consumer Staples Index and CPI Growth

14. External Factors
Consumer Staples Index and Unemployment Rate

15. External Factors
Consumer Staples Index and Consumer Sentiment

16. Economic Analysis
Correlation to S&P 500

17. Economic Analysis
Consumer Staples Index and GDP Growth

18. Financial Analysis

19. Financial Analysis

20. Financial Analysis

21. Financial Analysis

22. Financial Analysis
P/E Ratio for Consumer Staples the past 5 years

23. Financial Analysis
Gross Margin and Operating Margin

24. Financial Analysis
Profit Margin

25. Financial Analysis
ROA and ROE

26. Financial Analysis
P/E Ratio, EBITDA, and Revenue

27. Valuation Analysis
Price-to-earnings & Price-to-Book Value

28. Valuation Analysis
Enterprise Value-to-EBITDA & Dividend Yields

29. Valuation Analysis
Consumer Staples
S&P 500
Relative to the S&P 500

30. Valuation Analysis Beverages Food & Staples Retailing
Relative to the S&P
Relative to the S&P

31. Valuation Analysis Food Products Household & Personal Products
Relative to the S&P
Relative to the S&P

32. Valuation Analysis
Tobacco
Relative to the S&P

33. Technical Analysis
Bollinger Band

34. Technical Analysis
Moving Averages

35. Recommendation Currently “Overweight” in the portfolio
We recommend we shift to “Underweight” given the economic expansion, rising interest rate environment, and overall sector returns. Our sector will not perform as well during economic expansions.
All industries in this sector are a little “frothy” at this point in time.
If we have to be overweight in specific industries, we would choose “Food Staples and Retail” and “Food Products”.
These ratios perform better than that of other industries in the sector
We would choose to be underweight in “Tobacco” given the poor relative valuations and the overall poor relative valuation to the S&P 500.