The Stock market rally is getting old and many stocks are overpriced. One way to deal with this situation is to short overpriced stocks or simply sell and hold on to cash. But for those who want to stay in the market the traditional way to prepare is when investors Buy Consumer Stocks to diversify against a crash. Investor’s Business Daily notes that Coca Cola surges to a new high as investors reapportion their portfolios.
Stocks remained lower in afternoon trading Tuesday, as Coca-Cola’s (KO) breakout to new highs reflected relative strength in consumer stocks.
Consumer and defensive industry groups such as utilities and soft drinks were the best performing Tuesday. Restaurants were up nearly 2% after Buffalo Wild Wings (BWLD) soared 25% on news that Roark Capital Group offered $2.3 billion to take the company private. Buffalo Wild Wings has been recovering from its lows in October but remains 16% below a 52-week high.
In a sign of emerging strength in consumer plays, Dow component Coca-Cola broke out of a flat base, leaping past a 47.08 buy point in heavy volume.
Traders do not need to buy Coke for the long term but rather buy the stock and other consumer or utility stocks in anticipation of an uptick as investors flee overpriced equities before a crash.
There Is Always a Bull Market Somewhere
The high tech darlings have propelled the market ever higher. Their earnings have been the key but even with strong earnings it is hard to believe that Amazon is worth a more then 200 P/E ratio. Oil prices are down again as demand falters and demand falters because the world economy is not that strong and certainly not growing at its previous pace. The Chinese borrowed their way out of the Great Recession but now sit on a dangerously high level of debt. Despite their posturing as the next world superpower they are reminiscent of Japan in the 1980s when hubris mixed with debt caused a downfall and a quarter century of deflation. As the market cool off in area smart investors stay ahead of the curve and get out before the correction. Where their money goes is where the next bull market will be and for right now that means consumer stocks like Coca Cola.
Will Coke Get Into the Liquor Business?
According to CNBC Coca Cola may move into booze.
Coca-Cola shares are set for a breakout thanks to successes overseas and its mission to expand its beverage lineup, according to Wells Fargo, which upgraded the stock to outperform.
But probably most interesting in analyst Bonnie Herzog’s note was speculation that the 125-year-old purveyor of sugary beverages may make a move into alcoholic beverages. She expects management to make some hints of this at the company’s investor day on Thursday.
Coca Cola has a market cap slightly larger than that of AB Inbev which the largest liquor distributor in world. This makes investing in a stalwart like Coke more interesting as Investors Buy Consumer stocks to diversify against a crash.
