1. Dave Carson, Ranjoy Choudhuri, Thaddeus Davis
Consumer Staples
Dave Carson, Ranjoy Choudhuri, Thaddeus Davis

2. SIM WT vs S&P WT
Insert wt graph

3. Companies in Portfolio
Overview:
Companies in Portfolio
Kroger (KR)
Portfolio Wt. = 3.99%
Wal-Mart (WMT)
Portfolio Wt. = 3.61%
Largest in Sector
Wal-Mart (WMT)
Proctor & Gamble (PG)
Coca-Cola (KO)
Philip Morris International Inc. (PM)
Altria Group (MO)
Costco Wholesale Corp (COST)
The Kraft Heinz Company (KHC)
CVS Health Corp (CVS)
Walgreens Boots Alliance Inc. (WBA)
Mondelez International Inc. (MDLZ)
Consumer Staples:
Non-cyclical
Generally consistent dividends and earnings
Strong market positions mitigate upside

4. Business Analysis:
Sector has performed poorly against the broader S&P over the past year.
*Much better over longer time horizons
Consumer Staples will continue to confront challenges in the way of increasing commodity prices and margin compression - resulting from an inability to easily pass along price increases as competition from online retailers intensifies.

5. Economic Cycle: Late Recovery
Economic Cycle: Late Recovery. Traditionally, a good time for Consumer Staples.

6. Economic Analysis:
Forward GDP looks stable and to outpace inflation overall.
15% probability of recession according to forecast.

7. Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations 56
Highly correlated to Unemployment Rates

8. Financial Analysis: Balance Sheet
Liquidity has remained relatively constant at $29/share for the years ended 2016 and 2017
2018 estimates for book value per share goes down to $108 compared to $109 the previous year. However, estimates for 2019 indicate a book value of $114/share

9. Financial Analysis: Income Statement
Projections for sales growth & earnings are strong in the near term – as some analysts look for a rebound following the (-) TTM returns.
Long-term projections are more tepid from a growth perspective.

10. Financial Analysis: Cash Flow
Free Cash Flow for the sector is estimated to grow by 9% as of year end 2018 and 14% by year end 2019.
Dividends as of year end 2018 and 2019 are expected to go up to $16.51/share and $17.67/share, respectively. This increase is mainly driven by the expected increases in the cash flow from operations.

11. Relative Valuation 17% below average 11% below average

12. Recommendations
Select a handful of stocks in the sector that have high expected growth potential as they get closer to their intrinsic fair value – right sizing from the past year.
Maintain current weight.
While WMT and KR should get closer to their respective fair values, we can find other stocks in the sector that have a higher growth potential than WMT and KR, and thus outperform the broader S&P500.