Today's Market: Consumer Stocks That Still Look Like Buys

Includes: KO, PEP, PG
by: Matthew Smith

A lot was made of the jobs report and figures from Friday. As great as the numbers were it appears that there might have been some calculation errors which will show up once the numbers are recalculated for October and once the November figures are released. It appears that the government shutdown may have caused at least one week to get reported in the wrong month, thereby increasing the reported number of jobs created.

This is part of the reason we think that the market reversed course and headed higher on Friday, posting very strong gains across many sectors. We hope that the economy is in fact turning around and becoming stronger, but we will have to wait for another month of employment figures in order to decipher exactly what is going on in the data.

Although our market may be experiencing some weakness in the jobs market, it seems that American multinationals are investing heavily overseas in a bid to increase growth rates and finally show some top line growth - something that has been lacking the past few years.

Chart of the Day:

the Indian Rupee has seen a nice rebound and leveled out. The currency has been building support and if there are more announcements like PepsiCo's this morning then long-term there should be no worries for the country - assuming of course that they can get their spending under control.

(Click to enlarge)

Source: Yahoo Finance

We have no economic news today but will have news this week starting Wednesday.

Asian markets finished mixed today:

  • All Ordinaries -- down 0.25%
  • Shanghai Composite -- up 0.16%
  • Nikkei 225 -- up 1.30%
  • NZSE 50 -- UNCH
  • Seoul Composite -- down 0.38%

In Europe, markets are trading higher this morning:

  • CAC 40 -- up 0.53%
  • DAX -- up 0.26%
  • FTSE 100 -- up 0.31%
  • OSE -- up 0.41%

Good News For India and PepsiCo Shareholders ...

India finally got some good news as it pertains to capital inflows/outflows for the country. As many readers will remember, the country's currency, the Rupee, was under tremendous pressure only a month or two ago as market participants worried about India's growth stalling and their deficits. The Rupee has since found support and things are beginning to look up for the country now that a crisis has been averted.

Making matters better, PepsiCo (NYSE:PEP) announced that they will be investing $5.2 billion in the country by 2020 in a bid to increase the company's product offerings and its manufacturing capacity. This will help pave the way for further growth in India for PepsiCo, a country that has already received a lot of attention and investment as PepsiCo battles rival Coca-Cola (NYSE:KO) for the emerging market consumer.

The chart here is looking interesting with a potential breakout to the upside appearing quite possible. We would be buyers into the year-end rally which we anticipate will be strong this year. One could view this as a short-term trade or a long-term investment.

(Click to enlarge)

Source: Yahoo Finance

PepsiCo has been one of our favorite big market capitalization stocks and continues to be as it shifts its focus abroad to build upon its success overseas. The company already has roughly half of its business coming from overseas, and with this investment (and likely others to follow) we expect that the company will see a shift higher in its growth rate as it is dedicating capital to strong growth markets.

Not Really Overvalued ...

We have received some questions as of late regarding our call on Proctor & Gamble (NYSE:PG) and whether it was a sell now that it was back near its 52-week highs. The thinking is that the stock is once again expensive as it trades for right around 20 times the trailing twelve months' earnings. We hardly think that the P/E is a problem right now as other names, including PepsiCo and Coca-Cola which we discussed above, trade for just around the same P/E. We like these consumer focused names because as the economy picks up, they all gain pricing power and consumers begin to trade up from discount brands to the premier brands located in these companies' portfolios.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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