We've witnessed some astonishing and unheralded comebacks in the last few weeks -- and they are a reason to respect this market in ways that you may not have thought possible. Let me give you a list of some of the most unreal returns to glory we have seen in ages.
First, we got incredible news this past week from Kimberly-Clark (KMB) in the form of price increases to be put through in some of their most popular products -- like Huggies diapers, Cottonelle tissues and Viva paper towels.
Now, earlier this summer Procter & Gamble (PG) announced price increases on its array of similar products, and investors were skeptical they could hold. The stock went up a bit on a bad quarter -- truly the tell that some believed that their mid-single-digit increases would go through. The key signal from Kimberly? The company said the increases would be "mid-to-high single digits," So much for worries about whether the competition would try to take advantage of P&G's increase and take share. Both stocks continued to advance after the news, signaling how really this news is for shareholders.
Consumer Products On Fire
The whole consumer products group then caught fire -- including the much maligned General Mills (GIS) , a 4% payer that I recommended around $50. And, unfortunately, it still hasn't come back to that level. If you want to know the power of this move, though, look at Kellogg (K) , which has had a remarkable run on, well, nothing. Oh and it's worth pointing out that these stocks are signaling that rates are headed lower -- perhaps significantly, because these stocks are all yielding 3% or higher.
This price increase has a double-fold opportunity because these adjustments upward are coming at the exact same time as the actual commodity costs are falling. That means some sweet gross margin expansion.
This industry is starved for growth: hence the $3.2 billion bid for SodaStream paid by Pepsico (PEP) which some could say is a signal of the post-high-water mark of flavored sodas in plastic bottles sold at the supermarket. SodaStream sells machines that produce largely carbonated water, that need no plastic bottle creation and can be bought on line, so the next-gen folk never need to leave their home.
Okay, here's a total wild one and a testament to the fact that this market plays dead but doesn't stay dead: Simon Property Group (SPG) . Do you know that JC Penney (JCP) is in 67 of the 107 Simon Property Group malls? Talk about perilous, right?
Yet here's a stock that is just pennies from its 52-week high with a 4.4% yield. I find that astounding. The bonds of JC Penney are falling fast, signaling that the company might limp into the holiday season. Yet even as JCP is an anchor of so many of their malls, it's a signal that the market knows Simon will do just fine, maybe better, without the moribund JC Penney taking up space. There are many new, more experiential ways -- stores or otherwise -- that can fill the space.
One more.
REIT Stuff
No matter how many times, it seemed, that Deb Cafaro came on Mad Money to describe how well Ventas (VTR) is doing, no one seemed to listen because there had been some senior housing overbuilding and that is the bread and butter of this amazing REIT.
Deb told us in 2016 that we would begin to see a cessation of new building because of supply and demand and it would be self-correcting. Well, that's exactly what happened, it self-corrected, and that's evident from her numbers as her stock is up huge from when she reported her last quarter -- which, initially and mistakenly, the market didn't like despite the company offering a 6.4% yield and 23% returns through all sorts of cycles in a sector with what is now compelling demand.
The amazing thing is it seems there is more demand now at a much-higher price -- $59 with a 5.3% yield. What happened? Nothing with Ventas. It delivered. The market simply changed its mind on the REITs, especially the health care REITs, of which Ventas is most representative. And, yes, like with the surge in utilities, it didn't hurt that the yield-hungry buyers came back when the 10-year started going up in price and down in yield once again.
Sleeper stocks making a comeback. Only in this so-called aging bull market that just keeps reinventing itself on the fly.
