The products and services people will consume no matter the economic environment.
There are several notions as to what constitutes a guilty pleasure. One definition is something one enjoys but would be embarrassed to have others know, while another is enjoying something even though it may not be held in high regard or may not be good for you. As one might expect there are a number of guilty pleasures to be had, ranging from certain films and TV programs, tobacco, alcohol and marijuana to fast food, coffee and sugary treats as well as gambling and video games.
The Power of Stocks Riding the Guilty Pleasure Theme Tailwinds
The inelastic nature of the products produced by guilty pleasure companies has enabled them to weather price increases better than other products and services that are considered to be more of a commodity in nature. When the price of key inputs of these guilty pleasure products, (such as commodities like coffee, beef, sugar, or cocoa) decline after a period of upward movement, the combination of lower input costs and prior price increases tends to deliver better margins, profit generation, EPS growth and cash flow.
Think about it … when was the last time you saw the price of a beverage at Starbucks or the price for a package of Oreos decline? Demand for these products is such that rising costs are passed onto the consumer, but declining costs don’t result in much downward pricing pressure. Your wallet and your taste buds know what we’re talking about…
What is Thematic Investing
Thematic investing looks to identify pain points by looking at the intersection of shifting economics, demographics, psychographics and technologies, mixed in with regulatory mandates and other forces. Such pain points result in a pronounced secular market shift that shapes and impacts behavior, forcing companies to make fundamental changes to their businesses to succeed. Read More >>
What We Do at Tematica
Tematica Research provides equity research, economic insights, and investment ideas based upon its proprietary thematic perspective of the world and financial markets. The thematic discipline utilized by Tematica across its research and economic commentary, as well as its index and portfolio construction efforts, is the culmination of the more than 20 years Chief Investment Office Chris Versace spent analyzing industries and companies. Read More >>