Twilight of the (Consumer) Goods?
December 20, 2018·0 comments·in focus
The investment rationale for staples stocks hasn't fundamentally altered, yet their market treatment has swung sharply. The narrative explaining why investors should own them shifted not because the underlying business conditions changed, but because broader market attention moved to different concerns. What happens when the same company gets evaluated through an entirely new interpretive frame?
- Rising costs used to be a defensive feature. Staples could pass through price increases and remain stable holdings. In 2018, that same pressure became the central reason to avoid them entirely.
- Growth expectations changed the entire calculus. As recession fears displaced inflation concerns in market discourse, the focus on these companies shifted from "steady income" to "can they grow at all," exposing vulnerabilities that were always there but never discussed.
- The narrative shift outpaced any actual business deterioration. Media and analyst coverage of rising costs jumped 45% and growth concerns 37% since 2015, but this reflected changing market conversation, not a sudden crisis in these businesses.
- Management teams responded to the new story, not the old business. Altria's major Juul investment, brewing companies announcing cannabis partnerships, acquisitions meant to signal growth. The companies were chasing the new narrative rather than defending the old one.
- If attention shifts again, does the valuation reset follow? The same fundamental characteristics that looked like strengths in one narrative environment look like fatal flaws in another. The stocks themselves haven't changed.
Subscribe Today to Read More
Unlock instant access to this and hundreds of other evergreen essays that explore the world of narrative through hard science and human wisdom.
- Make more informed decisions as an investor and citizen.
- See through the nudges of Big Politics and Big Media.
- Become a better consumer of news.
- Maintain your autonomy of mind in a swarm of narratives.
- Join a community of more than 100,000 truth-seekers.
Looking for Deeper Insights?
Unlock exclusive market intelligence, trade ideas, and member-only events tailored for investment professionals and active investors with Perscient Pro.
VISIT PRO
DISCLOSURES
This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.
Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives.
Comments
Start the discussion at the Epsilon Theory Forum...