Gavekal Capital: Consumer Discretionary Has Fallen And Can't Get Up

Friday, March 28, 2014

Consumer Discretionary Has Fallen And Can't Get Up

In early February we mentioned that consumer discretionary was starting to show some cracks in their leadership status. And a few weeks ago we mentioned how richly valued this groups of stocks had become. Today we pick on Consumer Discretionary stocks again showing how they have been the true laggards YTD.

Over the past four years, Consumer Discretionary stocks have outperformed the MSCI World by 54% and have outperformed the average stock by over 75%. They were the second best performing sector (behind Health Care) over this period. While Health Care has managed to maintain leadership status YTD (second best performing group oddly behind Utilities), Consumer Discretionary has fallen to bottom, and by a pretty wide margin at that.

Digging deeper we see that it has been a broad based decline. There are 24 industries in the MSCI World. Of which, five fall in the Consumer Discretionary sector. Not a single Consumer Discretionary sector is positive YTD nor in the top half in performance YTD.

Taking it down the next step to sub-industries, we find that of the 154 sub-industries, Consumer Discretionary not surprisingly accounts for 10 of the worse 20 performing sub-industries YTD.

And finally, it is only fitting that worse performing stock YTD comes from the Consumer Discretionary sector (and actually the two worse performing stocks are Consumer discretionary stocks).

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
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