All too often, investors rely on conventional wisdom – ideas that were once true, but no longer hold. Great investment opportunities can come from questioning these ideas.
Take consumer packaged goods businesses who produce everyday goods, like Kraft Heinz, Edgewell and Kellogg. The long-held view has been that these businesses are highly defensive, and that investing in them is recession-proof. But is it really?
We think many of these businesses are facing a raft of challenges. These include the advance of private label brands, and a limited ability to boost margins.
In short, for some time, we have been convinced that the defensive qualities of these businesses have declined, and that their share prices are too high.
This whitepaper analyses the risks facing packaged goods businesses, and shows how our strategy has been able to profit by taking short positions in a number of these businesses.