Fishing In A Stocked Pond: 87% Of Consumer Staples Stocks Have Outperformed Over The Past Year by Eric Bush, CFA – Gavekal Capital Blog
We have blogged about consumer staples several times this month (see here and here) and for good reason. Consumer staples is the only GKCI DM sector out of 10 that has managed to surpass the May 2015 high. Given this, it isn’t surprising to see that a lot of consumer staples stocks have been outperforming the MSCI World. However, somewhat astonishing is the fact that the percentage of stocks outperforming is has high as it has been at any point since 2009.
As stock pickers, we always want to be picking names from a stocked pond (i.e. choosing investments in sectors where the majority of securities are outperforming the index). As an old mentor of ours used to say with a straight face, a portfolio of stocks that are underperforming will underperform the index! It seems so obvious to say but avoiding underperforming stocks is equally as important as picking outperformers.
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Over the past year, your odds of picking outperformers has greatly increased if you have focused your attention on consumer staple names. A whopping 87% of consumer staple stocks have outperformed the MSCI World Index. When you compare this to all DM stocks in general, where only 56% of DM stocks have outperformed the MSCI World Index over the past year, consumer staples have given investors quite the advantage. Several cyclical sectors have had the lowest percentage of stocks outperforming during this period. Just 47% of consumer discretionary stocks, 32% of energy stocks, and 47% of financial stocks have managed to outperform. The other pond that has been stocked for investors has been utilities. 72% of utilities have outperformed. Not exactly the internals of a risk on environment in the global equity market over the past year, wouldn’t you agree?