NESTLE

Its shares have been profit taking in the past two weeks from end Oct 2012 which is due to its lofty valuations after it hit an all time high of rm10.72 at end Oct 2012.

Now that the shares have given back some gains (15 Nov 2012), will they attract investor interest anew? After all, the outlook for the global economy is till uncertain and the outlook for the local bourse is clouded by the looming GE. Persistent investor caution has been one of the key drive factors behind the strong interest in defensive, high yielding consumer stocks.

The company manufacture a wide range of staple consumables targeting the mass market, where consumption has so far remained resilient. Indeed, it has been bolstered by rising disposable income and goodies handed out by the government in 2011. In addition, the company has a long, established track record and good corporate governance.

It is likely that the company will continue to do well going forward, earnings wise.

However its prevailing valuations still look rich. The current investor risk off sentiment is underpinned both by uncertainties in the global economy as well as domestic concerns ahead of the GE. Nevertheless, the stock remains a solid long term investment choice for the combination of steady earnings growth and yields.