The Daily Dose: And You See?

 | Sep 17, 2013 | 10:00 AM EDT  | Comments
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c

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dis

Would a Larry Summers or Tim Geithner Federal Reserve chairmanship have tanked Target's earnings in the year 2020?  How about if one of those "heroic" gentleman were announced to the Fed helm today, would it wipe out the market's progress from the late August lows? 

The answer to those profound, life-altering questions will never be, which is why I humbly beg you to shuffle along to truly profitable pastures. Let the Fed snark flow hot and heavy on Twitter and scare tactic gold commercials air at 11 p.m., it's time to get back to the work of data compiling prior to the start of another earnings season. 

Here is the reality anyway: a Pepsi (PEP) will be able to seed its growing roster of newbie brands no matter if tennis lover Tim Geithner is giving post-Fed conferences or Larry "I Love Sandwiches" Summers is blowing verbal wind on life at an Ivy League college graduation ceremony, introduced as Fed chairman.

Mr. Market on the Examination Table

Searching around for things to support my "de-risk into the Fed meeting day" call and have found none, which actually lends credence to where I am coming from (surprises not priced in, this won't be a complete dove-fest)...

  • Citigroup (C) raised its 2014 S&P 500 forecast to 1,900.  Hey, that means folks inside the bank responsible for other people's money are making stock recommendations based off that rosy forecast!
  • The Phia Semiconductor Index (^SOX), Dow transports and Russell 2000 continue to outperform the S&P 500 and Dow.
  • Gold, copper, and platinum continue to plunge as money returns to riskier assets, including emerging markets.

Spotlight stat: the last four moments when the Relative Strength Index on the S&P 500 hit or eclipsed its current level the index went onto fall somewhat immediately three of the times.

Look Inside for Growth

Own shares in a giant company growing earnings 7% a year and paying a decent dividend, for example Pepsi or Disney (DIS)?  Then likely you have bought shares in the company as they are doing increasing amounts of business in faster growing emerging markets as to compliment steady domestic operations. I want you to think a little differently on these mega large companies, even many mid-caps for that matter.

Don't overlook the strong possibility of a big company having emerging markets, or high growth smaller brands, inside a huge portfolio of products that could help spur growth in developed markets. You should really double check on a company's less talked about brands/assets as they could become tomorrow's cash-generating spinoff or major earnings driver. Allow me to illustrate on Pepsi since it's fresh in mind:

  • Pepsi has a 50% stake in Sabra (hummus, but morphing into much more), but only 18% of the U.S. population has consumed hummus. That will change as Pepsi markets the product as a multi-use dip and then through line extensions. Personally, I think the company has done a good job fine-tuning the usually rustic traditional hummus to U.S. tastes, specifically shifting to a creamier, cream cheese type texture.
  • Pepsi has more than 40 brands that are producing $250 million to $1 billion in retail sales volume. 

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