Global Equity Strategy "The Consumer: be selective" Garthwaite

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Global Equity Strategy "The Consumer: be selective" Garthwaite

Ryanair: the low-cost carriers get a huge competitive advantage when the cost of oil

rises in what is a structurally much better industry. The stock trades on a 2% discount to

its fleet value on 2027 estimates. Easyjet trades on a 76% discount to fleet value.

Household products: have seen the biggest de-rating of any sectors, are 2.5 std cheap

globally (and 2.7 std cheap in Europe), and are abnormally oversold. We struggle to

understand why they are perceived to be more disrupted than any other sector. The

teams have buys on Reckitt Benckiser and Colgate (the latter has positive earnings

revisions in the past 3 months).

Spain: If there is a bright spot for European consumer, then it is Spain (it accounts for a

quarter of EZ employment growth) with employment up 2.3% yoy fuelled by net

migration of 1.3% yoy and house prices rising 13% yoy. Moreover, Spain with c75% of

power from nuclear and renewables is one of the most resilient EU countries to higher

oil/gas prices. The sizeable consumer proxy would be consumer banks (i.e., Santander),

Inditex (buy rated and 17% of sales are from Spain).

Stock screen: If we screen for names that rank well in Europe on valuation (P/E, P/B),

earnings revisions, price momentum, crowding and quality, then the best ranked buys

are Zalando, Inditex, Carlsberg, Heineken, L'Oreal, and ABI. If we look at names that are

at least1 std cheap on P/E relatives, buy rated with positive earnings revisions, then we

would look at Carlsberg, Heineken, and M&S.

Where do we find ourselves cautious:

Underweight autos: P/E is not that cheap (with P/E relative to the market 5% above

their norm in EU and 63% Globally) with the sector only having de-rated 4% since 26/2.