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Burdett: Is it time to ditch the consumer?

Thames River co-head of multi-manager Robert Burdett says he is concerned consumer staples companies may have reached their trading peak with managers starting to focus on more cyclical areas of the market.

Burdett says there are signs that managers are rotating their portfolios based on valuations out of consumer staples into stocks that are too cheap because they are cyclical.

He says: “Stocks like industrials, potential financials, which are unloved and where managers are underweight are now being looked at again. We are reviewing where consumer staples are rated too highly? The companies will do well operationally, but will it be enough to drive prices higher?”

Burdett adds that another area that is impacted by growth is luxury goods.

He says: “The China slowdown is now well-documented and much of it is priced into the markets. This year, there is a change in power in China and in terms of the culture, it is about giving less gifts and so less things like handbags.”

This is a challenging environment for these luxury goods companies to perform well, according to Burdett.

The latest retail sales from China are from the Golden week, which is at the start of October, when millions of people travel and spend more than usual, bringing a discount war as retailers battle for market share.

According to Reuters, overall retail sales grew 15 percent during the National Day holiday, which coincided with the Mid-Autumn Festival to provide a eight-day break. That compared with 17.5 percent growth last year during a seven-day holiday.

Burdett says they are now talking to managers to guage as to what the future holds for consumer stocks.


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