Consumer Cyclical: China Growth Concerns Present Buying Opportunities
The market is now pricing in long-term cash flow assumptions that are more conservative than those baked into our longer-term consumer cyclical valuation assumptions.
Mentioned: MercadoLibre Inc (MELI)
, Dongfeng Motor Group Co Ltd (00489)
, SJM Holdings Ltd (00880)
, Dongfeng Motor Group Co Ltd (DNFGF)
, SJM Holdings Ltd (SJMHY)
, Alibaba Group Holding Ltd (BABA)
, Amazon.com Inc (AMZN)
, Ralph Lauren Corp (RL)
, TJX Companies Inc (TJX)
, Booking Holdings Inc (BKNG)
- Our consumer cyclical universe trades at a median price/fair value ratio of 0.89, remaining modestly undervalued over the past several months.
- Although we still see China as a key driver of investor concern, especially in the luxury goods space, where Chinese consumers represent 30% of global purchases, we believe these names, along with others, are well positioned, given the strength of their powerful brand intangible assets.
- The apparel sector has been challenged, and we still see headwinds into 2016. We think that warm weather, poor inventory management, a lack of new fashion trends, and shifts to other distribution channels and product lines have contributed to the weakness.
- The recent pullback in equity markets across the globe has opened up buying opportunities across Morningstar's global e-commerce coverage.
Dan Wasiolek does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.