Stick with Domestic Consumer Staples in 2012: Analyst
One of the best performers of 2011, the S&P Consumer Staples Sector index is up 11.07 percent year to date, compared to the S&P 500, up only 0.68 percent.
But in the year ahead, only a few of the sector's stocks will continue to outperform, says John Faucher, JP Morgan senior analyst.
"The group will probably start off a little dissappointingly as numbers come down," he forecasts, pointing out that the weakened European economy, along with weak consumer spending, will likely hurt sector-leading multinationals more than domestic companies.
"The dollar will determine whether people want to go for the multinational names which tend to have higher growth rates and a little more risk, or whether people want domestic names," says Faucher.
Faucher is bullish on U.S. names like Clorox and Kimberly Clark , saying that from a foreign-exchange perspective they are "definitely less risky."
The multinational companies Faucher says are more risky include Coke , Colgate , Procter & Gamble and Pepsi , whose international profits stand to lose value when the US dollar strengthens.
Any value loss becomes apparent when these companies report earnings in the U.S.
Yet, timing, as with much investing, is everything: If the European economy recovers from its debt crisis, Faucher thinks multinationals will "do a little bit better towards the back of the year."
CNBC Data Pages:
John Faucher does not own any of the aforementioned stocks; JP Morgan has had PG, KO, KMB, CL as investment banking clients within the past 12 months.