Stocks in the consumer staples sector are not expensive, reckons Credit Suisse, hiking its price targets by 15-20 percent while arguing that the 40 percent premium to the market is justified and could widen further.
“The cost of equity for consumer staples has fallen significantly, absolute and relative to the market, and sits today at close to a 10-year low. Meanwhile, the cost of equity for stocks with a Beta of over 1 has of course increased,” analysts at Credit Suisse say in a note.
In its own calculations, the bank has cut the cost of equity for the sector to 8.5 percent from 9.5 percent, resulting in a spate of APV (adjusted present value) price target rises.
Over the coming 12 months, the revised price targets imply the biggest upside - 24 percent - for Belgian-listed brewer Anheuser-Busch InBev.
It also sees double-digit percentage upside for ‘outperform’-rated Diageo , SAB, Pernod, Nestle, as well as for ‘neutral’-rated Unilever.
“The premium (for consumer staples) is completely understandable and rationale in the current climate, and could even push higher,” the bank concludes.
Reuters messaging rm://firstname.lastname@example.org