Strategists' Outlook On Strong Consumer Stocks


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The consumer sector is home to several strong names right now, led bySodaStream ( SODA ).

Mutual funds are doing a lot of the lifting. Fidelity's $42.6 billion Growth Company Fund and $2.1 billion Advisor Growth Opportunities both added to their stakes in SodaStream as of their latest disclosures.

Among more thinly traded stocks, the $405.9 million Schwab Small-Cap Equity began its current position inCulp ( CFI ). Six Vanguard funds either began or boosted positions inFranklin Covey ( FC ).

None of the industry subgroups that make up the sector is in the top 20 of IBD's 197 groups, based on six-month price performance.

But most are way up over the past seven months.

The Household-Appliances/Housewares group, which includes SodaStream, ranked 26th in Thursdays IBD, up from No. 101. Household/Office Furniture stood at No. 68, up from 133. It includes Culp, up 90% over the past 12 months.

Consumer Services-Education was No. 77, up from 145. It includesFranklin Covey ( FC ), up 52% in 12 months. Consumer Products-Electronics was No. 84, up from 114.Trimble Navigation ( TRMB ) is in the group. It's up 42% in a year.

SodaStream is up 32% over the past 12 months. The stock hit new 52-week highs on Tuesday and Thursday.

The company's products let consumers make carbonated drinks from tap water at home. Sales grew 6%, 43% and 36% from 2009 through 2011. Return on equity grew 58.3%, 20.5% and 18.1% those years.

Raymond James has a strong buy on Culp. The firm says Culp has been gaining market share. And it has been boosting margins and returns on capital.

Tupperware ( TUP ) is up 15% over the past 12 months. "The reason for its strong growth is its exposure to emerging markets," said Ian Gordon, senior analyst for S&P Capital IQ.

Currency translations trimmed 2012 earnings per share growth of the maker of beauty products and housewares by 9%, he says. The Street expects more impact in 2013. "I think that's too pessimistic," he said.

With 33% of 2011 revenue from Europe, exposure to the eurozone is a risk. Strong competition in Latin America and Asia is another.

Cleaning Up

Ecolab (ECL) has less direct exposure to consumers than others in its group, and its 66 Relative Strength Rating is holding its Composite Rating down at 81. Its stock is up 21% in 12 months. Its driver has been growing exposure to new markets.

The firm's acquisitions of Nalco in 2011 and of Champion Technologies, announced in December, opened the energy space to the cleaning and sanitization company.

"Now they benefit from the increased activity in extracting harder-to-reach energy from below ground," said Mike Ritzenthaler, senior analyst for Piper Jaffray.

Ecolab's fluids aid in energy extraction, equipment maintenance and cleanups. The diversification moves Ecolab's energy exposure to 20%, from 1% or less.

Ritzenthaler likes the firm's overall earnings visibility. He sees the company slightly expanding its multiple in the next 12 months.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Mutual Funds
Referenced Stocks: CFI , FC , SODA , TRMB , TUP

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