Consumer Discretionary

Report by AIR Capital

AIR expects a wave of upward revisions from European corporations in the coming months as tariff clouds thin, China stabilises, infrastructure spend ramps up and European rates remain low. The missing piece is consumer confidence, which should rebound quickly if geopolitical tensions ease. Consumer names like Inditex, Stellantis, LVMH, Diageo, Kering, Adidas, Nestle and Unilever look compelling after steep share price declines, with valuations back to decade-lows. Many of these firms are pursuing clear turnaround strategies focused on FCF generation, deep efficiency gains (utilising AI) and renewed focus on core businesses - supported by a trend toward insider CEO appointments, after a decade of appointing outsiders.

Report by View from the Peak

There comes a time when positioning becomes so extreme and attitudes so bearish that it it becomes time to act, not just for a tactical trade but a structural realignment that better reflects balance sheets and punishes reckless sentiment. According to Paul Krake, that is where we are in agricultural commodities. Some of his recommendations include LONG a basket of soybeans, wheat and corn vs LONG US two-year notes; such prices will only continue in the event of a hard landing, which is hedged by the two year note position. Paul also recommends LONG wheat and SHORT cocoa as a purely financial trade, and LONG Nestle and SHORT General Mills and Kellogg.

Report by Willis Welby

Methodology - the initial universes are stocks with $2bn+ M/Cap in the UK and $5.5bn+ across Europe. After that Willis Welby starts with a quality cut off based on their measure of Intrinsic Return on Capital Employed. They then narrow down using a combination of share price momentum and EBIT revisions before incorporating their expectations analysis via their measure of the implied to Y3 EBITM ratio. This month sees 6 stocks enter the UK screen (including Rio Tinto, Flutter, Renishaw) and 17 names added to the European version (including Nestle, Hapag-Lloyd, Roche, Vestas, Aker).

Consumer Staples

Report by Smart Insider

Paul Bulcke (Vice Chair since 2017) purchases €606k of stock at €303. He is on the board as a representative of Nestle (where he is Chair). It's interesting to note that Nestle reduced their ownership in L'Oreal from 23.3% to 20.1% in Dec 21 (at €400) and to see Bulke now make his first ever direct purchase in the stock. Béatrice Guillaume-Grabisch (Non Exec since 2016) also recently purchased €133k of stock. This is only her second purchase and it's notable to see her now buying at nearly twice the price after a 5 year gap.

Consumer Staples

Nutrition business is at risk of materially underperforming in the near term, while its infant nutrition business may actually be in secular decline (highlights fall in global birth rates and deteriorating performance in China). This is particularly concerning given that management has often cited infant nutrition as a core driver of growth. The firm’s other segments are not expected be able to fully offset this weakness. In addition to fundamental concerns, Gradient highlight several earnings quality issues including the overstatement of reported margins.