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Consumer Staples

Consumer Staples. Joel Forwalder Ryan Frank Michael Kerr. Topics of Discussion. I. Overview. II. Business Analysis. III. Economic Analysis. IV. Financial Analysis. V. Valuation Analysis. VI. Recommendation. Slide 3. Slide 7. Slide13. Slide 23. Slide 30. Slide 39.

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Consumer Staples

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  1. Consumer Staples Joel Forwalder Ryan Frank Michael Kerr

  2. Topics of Discussion I. Overview II. Business Analysis III. Economic Analysis IV. Financial Analysis V. Valuation Analysis VI. Recommendation Slide 3 Slide 7 Slide13 Slide 23 Slide 30 Slide 39 Table of Contents

  3. I. Overview

  4. Overview Market Cap: $3.35/24.06T • S&P 500 Sector Weightings • Companies in SIM Portfolio • Consumer Staples Performance vs S&P 500 YTD

  5. Sub-Sectors • Major Companies Overview • Food Products • Beverages • Food & Staples Retailing • Household Products • Personal Products • Tobacco Consumer Staples by Sub-Sector

  6. Staples Sub-Sector Performance YTD Overview

  7. II. Business analysis

  8. Phase of Business Cycle Business Analysis • U.S. between mid- and late-cycle phase • Global economy in synchronized expansion with low recession risk • Upside to global economic momentum may have peaked • Steady dividends and low volatility make this traditionally stable sector more attractive to investors late in the business cycle

  9. Consumer Trends Business Analysis • Personal Products highest YTD returns • Natural & organic foods continue to show faster YOY sales growth • Sales of consumer staples have grown faster in emerging markets

  10. Supply & Demand Business Analysis • Non-Cyclical / Defensive • Suppliers easily match the demand given the relatively consistent nature of the sector • Demand for the products usually grows in relation to overall population growth, excluding specific trends

  11. Risks Business Analysis • Disconnect between the market’s and the Federal Reserve’s expectations of tightening • Shift toward global monetary policy normalization likely impact high dividend yielding sectors • Competition continues to accelerate due to the growth of low-cost emerging market production • Commodity deficits - declining Chinese industrial growth

  12. Competitive Analysis Business Analysis

  13. III. Economic Analysis

  14. U.S 10-Year Treasury vs. Consumer Staples Economic Analysis

  15. World Currencies vs. Consumer Staples Economic Analysis

  16. Consumer Sentiment vs. Consumer Staples Economic Analysis

  17. CPI vs. Consumer Staples Economic Analysis

  18. Seasonality Effects On Consumer Staples Economic Analysis

  19. U.S. Retail Trade Industries vs. Consumer Staples Economic Analysis

  20. U.S. Merchant Wholesale Industry vs. Consumer Staples Economic Analysis

  21. GDP Of World Economies Economic Analysis

  22. Economic Forecast Economic Analysis

  23. IV. Financial Analysis

  24. Staples Sales Growth • Staples EBITDA Growth • Staples Earnings Growth Financial Analysis

  25. Sub-Sector Sales 3 Year Growth • Sub-Sector EBITDA 3 Year Growth • Sub-Sector Earnings 3 Year Growth Financial Analysis Most sub-sectors have seen little or negative growth recently

  26. Profitability Financial Analysis

  27. Economic Surprise vs. Consumer Staples & S&P500 Financial Analysis

  28. Consumer Staples Surprise Effects Financial Analysis

  29. Consumer Staples Surprise Effects (Cont.) Financial Analysis

  30. V. Valuation Analysis

  31. Valuation Analysis • Historical Free Cash Flow Yield • Historical Dividend Yield • Historical P/E Multiple • Historical P/B

  32. Sub Sector Valuation Comparison Valuation Analysis

  33. Staples vs S&P 500 Valuation Analysis

  34. Members Within Index Valuation Analysis

  35. S&P vs. Consumer Staples: 10-Year Historical Comparison Valuation Analysis

  36. VIX Index vs. Consumer Staples & S&P500 Valuation Analysis

  37. Technical Analysis: MACD Valuation Analysis

  38. Technical Analysis: Fibonacci Retracements Valuation Analysis

  39. VI. Recommendation

  40. Consensus Overview Recommendation

  41. Our Recommendation Recommendation • Major Positives: • Leaves room to invest in sectors yielding potential higher returns • Potential price correction of non-cyclical investments could allow the sector to be re-entered at more reasonable multiples • Major Risks: • Recessionary phase of the business cycle could approach sooner than expected and staples could outperform • Geopolitical risks could inflate demand for safer equity investments

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