US equities

For the US consumer stocks, poleaxed overnight, worth noting that some of them trade at pretty outrageous multiples, and in a market repricing towards value, there’s no guarantee your expensive defensive behaves like a low beta.

Costco is on a forward PE of 32x!

Target (TGT) also reported a slowdown in sales activity, and a bloated inventory accumulation. We’ve been thinking this would happen for some time, and it is clearly an industry wide phenomenon.


It is very likely, that as this frenzied inventory accumulation is unwound (via lower prices) we get our goods price deflation, and pressure on supply chains and shipping costs associatively ease.

Turning to the local market, we think Australian retailers will suffer a similar set of issues, and as such, we are avoiding the consumer discretionary names.

We have some consumer staples (COL) predicated on inflation hedges, low elasticity of demand, and strong industry structures, at broadly reasonable forward multiples.

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