Back in October, in the throes of what was the largest peak to trough sell off in years, I highlighted a group of U.S. Consumer stocks that I dubbed Teflong™, with respect to their near cult like status among consumers and investors alike. On the consumer front, it appears that we just can’t like without our daily fix of Apple (AAPL), Disney (DIS), Nike (NKE) and Starbucks (SBUX). As investors, these premium brands and products have for the most part been rewarded with strong year to date out-performance vs the S&P500 that is up about 2.5% and most importantly a premium valuation (except obviously in the case of AAPL).
Taking a quick look at this group of stocks it is important to note that they are on average up about 15% on the year, but all were down at least 5% from the recent all time highs following their most recent earnings (earnings day circled in red):
AAPL YTD:
DIS YTD:
NKE YTD:
SBUX YTD:
What I find most interesting about the price action among this group is that the stocks were at all time highs headed into Q1 earnings, gapped to new highs and then sold off. The obvious takeaway is that while the results were great, the stock’s performance discounted this. There was no incremental buyer. Shorts have been long gone, and they appeared to be crowded trades. I would add though that all of the above still seem to be in healthy bases and if the market were to breakout to new highs I would expect most of them to follow suit.
But there is one stock that I would have put in this category a year ago, that has in my mind fallen by the wayside, and that is Facebook (FB). While the stock just made a new all time high on earnings, it was unable to hold and has fallen back into the base it has been in for the better part of the last 10 months:
The stock has clearly lost momentum in the last six months despite printing massive revenue and user growth. While I generally don’t get to bothered about growth stocks trading at ridiculous multiples, FB’s $220 billion market cap puts it into an entirely different stratosphere from the likes of NFLX and TSLA, trading at a whopping 13x expected 2015 sales.
This week the stock did hold its 200 day moving average (yellow line), which should be mildly encouraging, but a failure here would have the stock right back at the low end of the 10 month range.
As for the rest of stocks detailed above, I would possibly become concerned about the quality of any breakout that was not confirmed from prior market leaders like AAPL and DIS. We are on breadth watch as the SPX threatens new highs.