Consumer spending in May was mostly unchanged from the previous month, according to data released Monday. Real spending, which takes inflation into account, was down 0.1%, making May the weakest month since June 2010.
Americans are slowing their expenditures for two main reasons: higher gasoline prices and higher jobless rates. Higher gas prices mean that consumers have to shift their spending away from consumer discretionary items like clothing and toward gasoline -- it also means driving more efficiently and keeping mileage low. Meanwhile, higher jobless rates encourage households to save more as it becomes more difficult to earn.
Consumer spending, also called "consumption" by economists, is the biggest component of GDP. Therefore, stagnant spending has broad consequences.
The Federal Reserve expects oil and other commodity prices to fall in the near future, which will hopefully result in more spending and hiring. Until then, the economy will probably continue growing at a snail's pace.
So how can we find investment opportunities amid the gloomy conditions? For this article, we looked at consumer goods stocks that have small short floats (i.e the percent of share float being shorted).
Short-selling is an investment technique that allows an investor to make money when the value of a stock falls. Because short-selling requires borrowing, an individual or institution must meet several requirements (including background checks) to engage in short selling. Thus, in general, short-sellers are more sophisticated than the average investor.
Because short selling reflects a prediction that prices are going to fall, a relatively small short float indicates that fewer short-sellers think that company has bad short-term prospects.
Do you agree with the short trends that these consumer goods stocks have bright prospects, despite the glum spending news? (Click here to access free, interactive tools to analyze these ideas.)
List sorted by lowest percentage of shares shorted.
1. British American Tobacco (NYSE: BTI ) : Cigarettes industry with a market cap of $84.41 billion. Only 0.03% of the company's shares have been shorted. It is a holding company that owns investments in numerous companies. Its brands include Dunhill, Lucky Strike, and Pall Mall.
2. Fomento Econ (NYSE: FMX ) : Brewers industry with a market cap of $111.94 billion. Only 0.05% of the company's shares have been shorted. It produces, distributes, and markets Coca-Cola beverages (Coca-Cola, Sprite, Fanta, Schweppes, etc.) in several Latin American countries including Mexico, Brazil, and Argentina. The company also owns and operates the OXXO chain of convenience stores in Mexico. It also manufactures labels, plastics, refrigeration equipment, as well as providing transportation logistics services.
3. Diageo (NYSE: DEO ) : Wineries & Distillers industry with a market cap of $50.29 billion. Only 0.09% of the company's shares have been shorted. It produces and distributes a collection of branded premium spirits, beer and wine. It brands include Smirnoff, Johnnie Walker, Baileys Original Irish Cream, Captain Morgan, J&B, Tanqueray and Guinness. In addition it also has the distribution rights for Jose Cuervo in North America and many other markets.
4. Anheuser-Busch InBev (NYSE: BUD ) : Brewers industry with a market cap of $89.35 billion. Only 0.16% of the company's shares have been shorted. It produces, markets, distributes and sells approximately 200 beer brands. These include Budweiser, Stella Artois, Beck's, Leffe, and Hoegaarden, and many local favorites. The Company also produces and distributes soft drinks, particularly in Latin America.
5. Sony (NYSE: SNE ) : Electronic Equipment industry with a market cap of $25.75 billion. Only 0.47% of the company's shares have been shorted. It is engaged in the development, design, manufacture, and sale of various kinds of electronic equipment, instruments, and devices for consumer, professional and industrial markets, as well as game consoles and software. Sony is also engaged in the development, production, manufacture, marketing, distribution and broadcasting of image-based software, including motion picture, home entertainment and television products and in the development, production, manufacture, and distribution of recorded music.
6. Pepsico (NYSE: PEP ) : Soft Drinks industry with a market cap of $108.20 billion. Only 0.70% of the company's shares have been shorted. It is a global food, snack and beverage company. The Company's brands include Quaker Oats, Tropicana, Gatorade, Lay's, Doritos, Cheetos Ruffles, Pepsi, Mountain Dew, Gatorade, 7UP, Walkers, Gamesa and Sabritas.
7. Colgate-Palmolive (NYSE: CL ) : Personal Products industry with a market cap of $41.78 billion. Only 0.92% of the company's shares have been shorted. Its products are marketed in over 200 countries and territories. Its products include Colgate Total and Colgate Max Fresh toothpastes, Colgate 360 manual toothbrushes, Colgate and Colgate Plax mouth rinses, Palmolive and Softsoap brand shower gels, Palmolive, Irish Spring and Protex bar soaps, and Speed Stick and Lady Speed Stick deodorants and antiperspirants.
8. Procter & Gamble (NYSE: PG ) : Personal Products industry with a market cap of $174.71 billion. Only 0.95% of the company's shares have been shorted. It is focused on providing consumer packaged goods. The Company's products are sold in more than 180 countries primarily through mass merchandisers, grocery stores, membership club stores, drug stores and high-frequency stores, the neighborhood stores, which serve many consumers in developing markets. Its brands include Olay, Braun, Pringles, and Bounty.
9. Fortune Brands (NYSE: FO ) : Home Furnishings & Fixtures industry with a market cap of $9.64 billion. Only 1.02% of the company's shares have been shorted. It is engaged in the manufacture and sale products, such as distilled spirits, home and security products, and golf products. The Spirits business sells its products under brand names including Jim Beam, Maker's Mark, Sauza, and Canadian Club. Its golf brands include Titleist, Pinnacle, and FootJoy.
10. Kellogg (NYSE: K ) : Processed & Packaged Goods industry with a market cap of $19.87 billion. Only 1.08% of the company's shares have been shorted. Its principal products are ready-to-eat cereals and convenience foods, such as cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles and veggie foods. Its brands include Kellogg's, Keebler, Cheez-It, Apple Jacks, Cocoa Krispies, Kellogg's Corn Flakes, Kellogg's FiberPlus, Froot Loops, Kellogg's Frosted Flakes, Frosted Krispies, Frosted Mini-Wheats, Kellogg's Low Fat Granola, Kellogg's Raisin Bran, Rice Krispies, Special K and Special K Red Berries.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen and Andrew Dominguez do not own any of the shares mentioned above.
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