RECENT NEWS
Forbes  May 28  Comment 
The best performing sector as of midday Thursday is the Utilities sector, up 0.3%. Within that group, NextEra Energy Inc (NYSE: NEE) and AGL Resources Inc. (NYSE: GAS) are two of the day's stand-outs, showing a gain of 1.2% and 1.2%, respectively....
Forbes  May 27  Comment 
Looking at the sectors faring worst as of midday Wednesday, shares of Energy companies are underperforming other sectors, higher by 0.2%. Within that group, Noble Energy, Inc. (NYSE: NBL) and ONEOK Inc. (NYSE: OKE) are two large stocks that are...
Market Intelligence Center  May 26  Comment 
For a hedged play on Consumer Staples Select Sector SPDR (XLP) MarketIntelligenceCenter.com's patented trade-picking algorithms selected a Sep. '15 $49.00 covered call for a net debit in the $48.02 area. That is also the break-even price for the...
The Hindu Business Line  May 25  Comment 
Grasim Industries Ltd will sell its consumer products business that forms a minuscule portion of its overall business to Future Consumer Enterprise Limited on a slump sale basis. The div...
Market Intelligence Center  May 22  Comment 
MarketIntelligenceCenter.com's patented algorithms have identified an attractive covered-call trade on Consumer Staples Select Sector SPDR (XLP). Look at the Dec. '15 $49.00 covered call for a net debit in the $47.81 area. This trade has a...
Insurance Journal  May 19  Comment 
ANV Holdings has unveiled a new consumer products team within Lloyd’s Syndicate 5820, reporting to Bruce Whitmee, who was recently appointed active underwriter (subject to regulatory approval). Based in London, the team of eight is headed by...
Clusterstock  May 15  Comment 
Until we're headed into a recession, don't go piling into consumer staples.  In a note to clients on Thursday, Jonathan Glionna and the equity strategy team at Barclays looked at the performance of the consumer staples sector, which includes...
Forbes  May 14  Comment 
In afternoon trading on Thursday, Healthcare stocks are the best performing sector, up 1.3%. Within that group, Boston Scientific Corp. (NYSE: BSX) and St. Jude Medical, Inc. (NYSE: STJ) are two of the day's stand-outs, showing a gain of 3.7% and...
The Hindu Business Line  May 14  Comment 
Lycos Inc., acquired by the Hyderabad-based digital marketing solutions firm Ybrant Digital, has launched Lycos Life, a consumer products division. The new division will focus on communication and...




 
TOP CONTRIBUTORS

The Toy business leads this category, and by a wide margin. The 3 largest U.S. toymakers, Hasbro (HAS), Mattel (MAT), and JAKKS Pacific (JAKK), were all on the screen for significant periods of time. I think this is another illustration of how the Magic Formula does a lot of the work of digging up beaten down sectors for us. The first quarter is generally a weak one for toymakers, as most of their profits come in the Christmas season (as much as 60%).

The original thought was to separate between Consumer Staples (items that we must buy regardless of our financial condition) and Consumer Discretionary (luxury goods). However, many of the industries above would be ambiguous. For example, we need shoes (making them a staple), but in tight times we may decide to buy a store brand instead of more expensive Nike (NKE), adding a measure of discretion to the purchase. Consumer goods companies can make great long term investments - just ask Warren Buffett, whose investments in Coca-Cola, Anheuser-Busch Companies (BUD), and Procter & Gamble Company (PG) are legendary.

Forces affecting the Retail Industry

Brand is unquestionably the strongest form of competitive advantage in Consumer Goods. However, it's important to also judge the durability of the brand. For example, Coke is a brand known around the world, and has endured over 100 years of competition to still enjoy the top spot in the soda category today. That's a durable brand. Compare this to Gap (GPS).Ten years ago, Gap and it's spin off stores Old Navy and Banana Republic were considered fashionable and chic for the all important teen and college set. Today, the store is avoided by those same groups, lest their fashion sense be ridiculed by friends. That's a fickle brand. It's important to be able to separate a fad from a juggernaut. Add this to the PR problems Mattel faced last year with lead paint, and you have an unwanted sector, with some interesting potential investments.


Distribution is also important in the Consumer Goods sector. A company with a wider distribution network can leverage economies of scale to earn more on their fixed costs. An especially attractive arrangement is when one of these companies has an exclusive deal with a large distributor. Take Anheuser-Busch (BUD), for example. While this firm has an incredibly strong brand, they also require exclusivity from distributors. This allows them to lock out competitors like Molson Coors (TAP) and Miller, protecting profit margins. The soda companies also do this well. Have you noticed that McDonald's (MCD) only sells Coke products, while Pizza Hut (Yum! Brands (YUM)) only sells Pepsi? With these exclusive deals, competitors are blocked from those roads of distribution, protecting profits for the established companies.

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