Tag Archives: mdlz

Best And Worst Q2’16: Consumer Staples ETFs, Mutual Funds And Key Holdings

The Consumer Staples sector ranks third out of the ten sectors as detailed in our Q2’16 Sector Ratings for ETFs and Mutual Funds report. Last quarter , the Consumer Staples sector ranked first. It gets our Neutral rating, which is based on aggregation of ratings of nine ETFs and 15 mutual funds in the Consumer Staples sector. See a recap of our Q1’16 Sector Ratings here . Figure 1 ranks from best to worst all nine Consumer Staples ETFs and Figure 2 shows the five best and worst rated Consumer Staples mutual funds. Not all Consumer Staples sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 16 to 115). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Consumer Staples sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 Click to enlarge * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 Click to enlarge * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Fidelity Select Automotive Portfolio (MUTF: FSAVX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. Fidelity MSCI Consumer Staples Index ETF (NYSEARCA: FSTA ) is the top-rated Consumer Staples ETF and fidelity Select Consumer Staples Portfolio (MUTF: FDFAX ) is the top-rated Consumer Staples mutual fund. FSTA earns a Very Attractive rating and FDFAX earns an Attractive rating. PowerShares Dynamic Food & Beverage Portfolio (NYSEARCA: PBJ ) is the worst rated Consumer Staples ETF and ICON Consumer Staples Fund (MUTF: ICRAX ) is the worst-rated Consumer Staples mutual fund. PBJ earns a Neutral rating and ICRAX earns a Very Dangerous rating. 117 stocks of the 3000+ we cover are classified as Consumer Staples stocks. Procter & Gamble (NYSE: PG ) is one of our favorite stocks held by FSTA and earns an Attractive rating. Over the past decade, Procter & Gamble has grown its after-tax profit ( NOPAT ) by 6% compounded annually. Since 2008, PG has earned a double digit return on invested capital ( ROIC ) and over the last twelve months earns an 11% ROIC. In spite of revenue declines, Procter & Gamble has generated a cumulative $64 billion in free cash flow over the past five years. However, at current prices, PG remains undervalued. At its current price of $82/share, PG has a price-to-economic book value ( PEBV ) ratio of 1.1. This ratio means that the market expects PG’s NOPAT to only grow 10% over the life of the corporation. If Procter & Gamble can grow NOPAT by 3% compounded annually for the next decade, (half the rate of the previous decade), the stock is worth $94/share today – a 15% upside. The company’s 3% dividend yield also adds to the attractiveness of PG. Mondelez International (NASDAQ: MDLZ ) is one of our least favorite stocks held by ICRAX and earns a Very Dangerous rating. MDLZ was placed in the Danger Zone in late March 2016 . Despite impressive revenue growth, Mondelez has never generated positive economic earnings . In fact, since 2008, the company’s economic earnings have declined from -$763 million to -$1.3 billion. The company’s ROIC has declined from 7% in 2009 to 5% in 2015. As we pointed out in our Danger Zone report, MDLZ likes to push focus away from the deterioration of business operations by using misleading non-GAAP metrics that remove many standard operating costs. Worst of all, MDLZ is significantly overvalued. To justify its current price of $42/share, MDLZ must grow NOPAT by 10% compounded annually for the next 17 years . The expectations embedded in the stock price are simply too high considering the decline in profits and the corporate governance risk related to the company’s reliance on non-GAAP measures of performance. Figures 3 and 4 show the rating landscape of all Consumer Staples ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs Click to enlarge Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds Click to enlarge Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme. Disclosure: I/we 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. I have no business relationship with any company whose stock is mentioned in this article.

Activist Attack On Female CEOs

There are 27 companies in the S&P 500 that have a woman CEO – just 1 of those companies have any of the three common takeover defenses in place – including staggered boards, poison pills or unequal voting rights. Nearly one in four of the men-led S&P 500 companies have at least one defense. Now, an even bigger question, is it that activists are targeting women-led companies or is it that activists are really just target underperforming companies? (click to enlarge) With Carl Icahn’s targeting of Xerox (NYSE: XRX ), it’s official, activist investors are out to get female CEOs. Part of this is the fact that they have poor defenses against said activists. There are 27 companies in the S&P 500 that have a woman CEO – just 1 of those companies have any of the three common takeover defenses in place – including staggered boards, poison pills or unequal voting rights. Reynolds American (NYSE: RAI ) is the lone exception, but the takeover defense was in place long before Susan Cameron showed up there. Nearly one in four of the men-led S&P 500 companies have at least one defense. The bigger question, I think, is not having these takeover defenses, is that good or bad corporate governance practice? Xerox’s Ursula Burns is just the latest to get a call from an activist this year. Nelson Peltz’s Trian Fund has been a true woman hater of late, taking on DuPont’s (NYSE: DD ) Ellen Kullman and PepsiCo’s (NYSE: PEP ) Indra Nooyi before that. Peltz has also been putting pressure on Mondelez’s (NASDAQ: MDLZ ) Irene Rosenfeld. Bill Ackman and his Pershing Square ( OTCPK:PSHZF ) have joined in on the Mondelez activist fiasco as well. David Tepper, the recent TerraForm (NASDAQ: TERP ) activist, was part of a group with frontman Harry Wilson that went semi-activist on GM (NYSE: GM ) CEO Mary Barra to force her into a massive buyback. Now, an even bigger question, is it that activists are targeting women-led companies or is it that activists are really just target underperforming companies? Is it safe to assume that activists target women CEOs because they see them as easy targets? And it could be that Wall Street is simply giving women the tough turnaround jobs that prove impossible – Marissa Mayer, Yahoo (NASDAQ: YHOO ), anyone? Just chew on this will you; takeover defenses are said to weaken shareholder rights. Hence, women-led companies score better in the corporate governance department. And there’s the strong correlation of underperforming stocks and weak shareholder rights.