2011: The Year of Consumer Staples

Joel Anderson  |

A number of intriguing stories developed over the course of 2011 in the Consumer Staples sector, and the sector as a whole had a good year. It stands to reason that in a volatile, harrowing market, investors make seek safe haven in relatively stable consumer staples stocks that can give them a safe place to park their money while the markets as a whole yo-yoed with any news out of Europe.

One strong indicator of the sector's strong year, defying the market's fluctuations, would be the Consumer Staples Select Sector SPDR Fund (XLP), an ETF linked to the S&P Select Sector Index for Consumer Staples. It's up over 11 percent on the year. While the fund dropped in early August (along with EVERYTHING else), it has rebounded strong and gained steadily through the end of the year.

Stocks Up for Big Players

Some of the biggest players in the Consumer Staples sector predictably posted big gains that reflected the benefits to the sector as a whole. Kraft (KFT) is up nearly 20 percent on the year, Colgate-Palmolive (CL) has jumped over 16 percent, Kimberly Clark (KMB) gained over 17 percent, and General Mills (GIS) climbed nearly 15 percent. However, the biggest gainers of the year appear to be cigarette companies (wonder if anything about 2011 was making people smoke more?). Philip Morris (PM) has showed steady gains on strong earnings all year, approaching 35 percent on the year, and was joined by Reynolds American (RAI), up almost 30 percent, and Altria Group (MO), gaining over 20 percent.

Green Mountain Coffee Rosters Becomes Battleground Stock

Green Mountain Coffee Roasters (GMCR), maker of the popular K-cups, has had a very busy year. The stock is up significantly on the year, over 35 percent, but it's also lost nearly 60 percent in the last quarter. At the core of these wild swings are Green Mountain's big gains early in the year which caught the eye of Greenlight Capital's head, David Einhorn. Einhorn, who has gained great fame for shorting stocks that were in serious trouble, began giving a presentation on Green Mountain highlighting what he saw as potential trouble for the company's future as well as accusing Green Mountain of shady accounting practices. Green Mountain remained mum on the subject and, when it released a Q4 earnings miss that seemed to confirm Einhorn's assertions about the company and Green Mountain lost nearly 40 percent in a single day.

Diamond Foods Goes Through Rough Year

It should have been a banner year for Diamond (DMND). After acquiring Kettle Brands last year, Diamond looked to be ready to solidify its place in the snack food market when it announced plans to purchase Pringles Brand from Proctor & Gamble (PG) in April. However, Diamond came under increased scrutiny over potentially improper payments to walnut farmers. The payments, which may have been used to help improve the company's books prior to the purchase. The potential improprieties lead the company's stock to begin an early November plunge that was further pushed by the suicide of Joe Silvera, who was working on the audit committee investigating the payments until he had to recuse himself. There's no specific evidence that Silvera's suicide was related to the payments, and the company's stock took a major leap after KeyBanc analyst Akshay Jagdale told clients he was anticipating a relatively short investigation into Diamond's accounting practices, but the company's stock has still taken a hit, down over 45 percent on the year.

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DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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