S&P/ASX 200 CONSUMER STAPLES significantly outperformed S&P/ASX...

S&P/ASX 200 CONSUMER STAPLES significantly outperformed S&P/ASX 200 in the past 20 years. XSJ showed both long-term growth and defensiveness during market turbulence.

However, if we look deeper into the constituents of XSJ, we will find that, in the past three years, operators with diversified product and service lines significantly outperformed the XSJ, whereas companies with narrow product ranges are far more volatile and significantly underperformed the XSJ on average. The point I am trying to make here is that diversification is vital for long-term growth or even survival of consumer staple businesses. HLF now is well positioned to diversify albeit at great costs.

Over the past 3 years, HLF SP declined 82.70% vs A2M declined 67.17% and BUB declined 37.18%. It is fair to say that 50% of HLF SP decline can be attributed to the sector-wide downtrend. However the management and the board were responsible for the rest. They were in the driver’s seat in terms of their relation with the ex-owners. Their poor management of this relationship resulted in a lose-lose situation for both the ex-owners and the company (shareholders). E.g. If VC could exit in the same way as Bergen did, the SP wouldn’t have fallen so low.

I totally understand LT holders' frustration and anger. Nonetheless, given that HLF and the broader sector are bottoming, the current SP does present a great opportunity for average-down and an excellent entry point for newcomers.

Outperformers within XSJ

Underperformers within XSJ (Note: UMG is not included in this 3-year chart. It is down 5.37% since listing in Mar 20 while XSJ is up 11.42% over the same period)