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Consumer Staples Getting Pricey: Pros

Wednesday, 29 May 2013 | 6:42 PM ET

With valuations as high as 22 times forward earnings, a few consumer staples stocks appear to have formed a bubble, the "Fast Money" pros said Wednesday.

"These things are still immensely expensive relative to the market, immensely expensive relative to their historical valuations," Mike Khouw of DASH Financial said on CNBC.

"There's not a whole lot more upside one could potentially see. If rates go up, these things get hit. If the market goes down, they get hit," he added. "I don't really understand why anybody would look to buy them here."

Shares of spice maker McCormick & Co. were priced at 22 times forward earnings, Colgate-Palmolive at a 20.8 multiple, Procter & Gamble at 18.7 and Johnson & Johnson at 15.8.

Dan Nathan of RiskReversal.com said that he had been in JNJ, calling it "a mid-single-digit grower that was trading at high-teens multiple because of that 3 percent dividend yield."

Stuart Frankel's Steve Grasso said the run up in stock prices for consumer staples were all about multiple expansion.

"Nothing has changed," he added. "And if anything's going to get hit, you're going to sell high-yield, this is the sector that you're going to sell."

Tim Seymour of EmergingMoney.com said that even though P&G appeared expensive, it was still a strong company with better prospects than competitor Unilever.

"An expensive stock is ultimately a good barometer," he said. "If you're buying a great company like Procter & Gamble at 14 times, who cares what the market is doing?"

Trader disclosure: On May 29, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Tim Seymour is long AAPL; Tim Seymour is long BAC; Tim Seymour is long SBUX; Tim Seymour is long CLF; Tim Seymour is long JOY; Dan Nathan is short IWM; Dan Nathan is short SPY; Dan Nathan is long JNJ JUN 87.5 PUTS; Dan Nathan is long CAT JUN 87.5/80 PUT SPREAD; Dan Nathan is long IBM JUN 20/195/185 PUT FLY; Dan Nathan is long NTAP JULY 35/40/45 CALL FLY; Brian Kelly is long TLT; Brian Kelly is long TREASURIES; Brian Kelly is short SPY; Steve Grasso is funds long EMC; Steve Grasso is funds long NEM; Steve Grasso is funds long SPY; Steve Grasso is funds long HPQ; Steve Grasso is funds long NEM; Steve Grasso is funds long ZNGA; Steve Grasso is funds long F; Steve Grasso is funds long GM; Steve Grasso is funds long LOW; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long BAC; Steve Grasso is long GDX; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MJNA; Steve Grasso is long NVIV; Steve Grasso is long PFE; Steve Grasso is long QCOM.

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