Investors have a unique window to buy shares in defensive stocks such as Unilever PLC (LON:ULVR) and Reckitt Benckiser Group PLC (LON:RB.) before the market carries them higher, analysts at Berenberg have suggested.
The recent performance of the consumer staples sector relative to the market is currently showing a “rare dislocation” from global bond yields of late, the German bank said in a note published on Wednesday.
READ: Unilever expected to hold steady in third-quarter update[hhmc]
“Historically, such dislocations have been good lead indicators to sector outperformance,” analysts said in the note, pointing to data going back to the mid-1990s.
This is thought to reflect the sectors “bond-like” characteristics, namely the good visibility on dividends due to the companies highly cash-generative business models and exposures to less-discretionary consumer products.
Since the beginning of the year, bond yields have fallen from +2.7% to +1.7% while the consumer staples sector outperformed the market by 3%.
Based on the normal historical relationship in recent years this would have been expected to result in a 21% outperformance.
Rising tide may not lift all boats
“There have not been many dislocations of this magnitude since 2000,” Berenberg said, suggesting the wider consumer staples should outperform the market by 16%, with the household and personal care (HPC) sub-sector due around 10% relative upside.
But analysts said the “rising tide may not lift all boats”, as different HPC stocks have not all moved as one in recent months.
Unilever and Reckitt Benckiser were picked out as the best London-listed HPC names, both rated Read More – Source
