Growth of middle class spurs global grocery demand

But a look at food retailers around the world shows that some stocks are much better positioned than others.

By Apr 18, 2013 2:02PM

Grocery clerk copyright Corbis, SuperStockBy Eoin Treacy, Fullermoney

China's and Russia's voracious appetites for energy and other commodities reflect the evolution of the middle class as per-capita consumption of resources rises.

China's exports of progressively higher-value items are in line with our view that as it moves up the value chain in terms of its manufacturing prowess, this will in turn further bolster the health of the consumer class.

The supermarket sector reflects this theme in both countries. Russia- and London-listed Magnit (London: MGNT), is Russia's largest supermarket chain, and with the advent of hypermarkets, it might be considered Russia's answer to Wal-Mart (WMT). S&P recently upgraded the company's credit rating on its "robust earnings outlook."

The London-listed stock broke out of its two-month range to post a new high, and a sustained move below $40 would be required to begin to question the consistency of the medium-term uptrend.

Hong Kong-listed Wumart (Hong Kong: 1025) has operations in a number of China's Tier One cities. Its stock hit a medium-term peak in 2010 and has held a progression of lower rally highs since. It found at least short-term support in the region of HK$12.50. A break above HK$14 would challenge the consistency of the six-week decline.

Australia's Wesfarmers (Australia: WES) has a dominant position in the country's retail sector. It broke successfully above the psychological near A$40 in February. The shares have since pulled back to test that level, but a sustained move below the 200-day moving average -- currently near A$37 -- would be required to question medium-term upside potential.

U.S.-listed Wal-mart is an S&P 500 Dividend Aristocrat and is an increasingly globally oriented company with foreign operations, most notably in the UK, China and Mexico. The shares completed a 12-year base last year and found support in the region of the 200-day MA in December. A sustained move below the trend mean would be required to question medium-term upside potential.

Kroger (KR) surged out of a four-year base in January and rallied impressively to post a new all-time high. Recently, the shares pulled back sharply, suggesting a process of mean reversion is under way. If it can hold more than half the recent advance during a process of consolidation, the benefit of the doubt can be given to medium-term potential for a sustained breakout to new highs.

Amid explosive growth in the U.S., Whole Foods Market (WFM) has embarked on an aggressive international expansion, which is likely to soak up quite a bit of capital over the medium term. The shares lost uptrend consistency from October and will need to sustain a move above $120 to reassert medium-term demand dominance.

Germany's Metro AG (Germany: MEO) sources approximately 30% of revenue from outside Western Europe. Russia represented its largest market in Eastern Europe, with 7.52% of revenue in 2012. China is its largest in Asia at 2.54%. The shares have a forward P/E of 10 and yield 4.46%.

The performance has probably been hampered by the effect of the eurozone's debt issues on consumer spending, and prices have returned to test the region of the 2009 lows near €20. A sustained move below that level would be required to question base formation development.

In the UK, Tesco (London: TSCO) is an S&P Europe 350 Dividend Aristocrat, and is presently unwinding its short-term overbought condition. A sustained move below 350p would be required to question medium-term upside potential.

More from The MoneyShow 

Apr 18, 2013 4:33PM
Growth of Middle Class what a Joke ! The middle class in this country is losing their homes robbed by the banks which have made them Slaves to Debt ! There is no growth only a imminent collapse of the MIDDLE CLASS !
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.