- Consumer defensive valuations have continued to trend higher over the past several months, leaving the sector slightly overvalued at a price/fair value ratio of about 1.04.
- In light of slowing growth prospects around the world, expectations for sluggish revenue growth appear reasonable.
- We expect cost-cutting and brand-building to remain key areas of focus over the coming quarters, but think that the market is overly optimistic in terms of the profit gains that are likely to be realized in some cases.
- From our vantage point, a handful of consumer defensive firms look attractive, with overly pessimistic margin assumptions baked into their shares.
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Ken Perkins does not own shares in any of the securities mentioned above. Find out about Morningstar’s