Consumer Staples (XLP) – Positioning and Patterns
In what some may call an unexpected outcome, February 5th saw JaguarAnalytics take profits in Hershey (HSY) options for a 139% gain, currently the largest gain YTD in the Master Performance Tracker.
Consumer Staples will likely be in focus again this week as the 55th Annual Consumer Analyst Group of New York (CAGNY) Conference will be taking place in Orlando, Florida. General Mills (GIS) will get the festivities going tomorrow morning. The rest of the schedule can be seen below:
Elsewhere, JPMorgan Consumer Specialist Briggs Barton would issue a note late last week highlighting that with the continued ascension of Consumer Staples YTD remaining in focus, he thought it would be worthwhile to provide an update on what they are seeing in the space in terms of positioning, flows, and historical performance patterns. Some of those takeaways include:
• The move higher in Staples has been driven more by market rotations and factor dynamics (notably the unwind in Tech) rather than improving fundamental optimism towards the sector.
• RSI on the XLP is now screening oversold at 80 and their Positioning Intelligence charts/data show an uptick in Long selling into the strength around 2/6 when RSI hit 82.
• Their “High-Touch Trading Flows” have been more mixed within the space to start the year but lean better to buy. A lot of the price action within Staples has been driven by hedge fund covering as the rally came from depressed positioning levels, but they have seen some emerging Long-Only interest to own the space (concentrated in the large/liquid/blue chip names like CL, PG, PEP, MNST, PM, CLX, WMT).
• While the unwind in Tech has been a well-discussed factor that has helped to bolster Staples, they haven’t seen $ flowing directly into the space from Tech in a material way (i.e. seems more algo based). Therefore, if Tech finds a floor and degrossing/outflows from the space stabilize or reverse, then you could see a commensurate reversal in some of the dynamics that have propped up the Staples complex.
• In all 5 years when XLP was >5% through January/February, XLP has finished the full-year underperforming relative to the S&P.
• In 9 of the 14 years where XLP outperformed relative to the S&P in January/February, XLP finished the full-year underperforming relative to S&P.
• In the 11 of the 15 years where XLP had positive absolute YTD performance through January/February – XLP finished the full-year underperforming relative to the S&P in 11 of those years vs outperforming in 4.
