Consumer Staples ETF Investing 101_1

Post on: 5 Апрель, 2015 No Comment

Zacks Funds — Seeking Alpha — Wed Mar 04, 6:25AM CST

The consumer staples sector experienced a roller coaster ride in 2014. In the beginning, the companies had to bear the effects of a prolonged and severe winter, increasing food costs, a weak consumer spending environment and currency headwinds. However, things began to improve in the second half of the year on the back of a moderate economic recovery, better job prospects, rising wages, improved business and renewed optimism as a result of the housing recovery.

With oil and natural gas prices subsiding, consumers are now left with more disposable income. Commodity costs have in many cases stabilized, with some at five-year lows. Consumers are also expecting lower inflation, primarily due to lower gas prices. (read: 3 Consumer Staples ETFs Hitting 52- Week Highs )

Not surprisingly, consumer staples stocks are now performing well compared to the S&P 500 (NYSEARCA:SPY ) as a whole. In fact, the rebound can be seen in the last reported quarter results of most of the stocks in the sector, including Tyson Foods Inc. (NYSE:TSN ), Sysco Corp. (NYSE:SYY ), United Natural Foods, Inc. (NASDAQ:UNFI ) and Supervalu Inc. (NYSE:SVU ), which have delivered improved performances on the back of a recovering economic scenario.

However, there are some companies like The Procter & Gamble Co. (NYSE:PG ), Mondelez International, Inc. (NASDAQ:MDLZ ), Molson Coors Brewing Company (NYSE:TAP ) and Kellogg Co. (NYSE:K ), which are still grappling with a challenging operating environment. These companies have been posting sluggish results due to lackluster top line growth, lower unit volumes and currency headwinds. Hopefully, the year 2015 will prove to be better for these companies, with a strong rebound in earnings.

Playing the Sector through ETFs

Given the defensive nature of this sector, it will outperform when equity markets are more bearish and underperform when bullish. The ups and downs of the sector due to U.S. and global exposure can be played with a wide array of ETFs (see all Consumer Staples ETFs here ).

The ETFs can act as an excellent investment medium for those who wish to take a long-term exposure within the consumer staples sector.

For those interested in taking a look at consumer staples, we have highlighted a few ETFs tracking the industry, any of which could be an interesting pick:

Consumer Staples Select Sector SPDR ETF (NYSEARCA:XLP ):

Launched on December 16, 1998, XLP is an ETF that seeks investment results corresponding to the S&P Consumer Staples Select Sector Index. This fund consists of 41 stocks of companies that manufacture and sell a range of branded consumer packaged goods, with the top holdings being Procter & Gamble, The Coca-Cola Company (NYSE:KO ) and Wal-Mart Stores, Inc. (NYSE:WMT ). The fund’s expense ratio is 0.16%, and it pays out a dividend yield of 2.35%. XLP had about $10.2 billion in assets under management as of February 13, 2015.

Vanguard Consumer Staples ETF (NYSEARCA:VDC ):

Initiated on January 26, 2004, VDC is an ETF that tracks the performance of the MSCI US Investable Market Consumer Staples 25/50 Index. It measures the investment return of large-, mid- and small-cap U.S. stocks in the consumer staples sector. The fund has a total of 98 stocks, with the top three holdings being Procter & Gamble, Coca-Cola and PepsiCo, Inc. (NYSE:PEP ). It charges 0.12% in expense ratio, while the yield is 1.90% as of now. VDC has managed to attract $2.8 billion in assets under management till January 31, 2015.

First Trust Consumer Staples AlphaDEX (NYSEARCA:FXG ):

FXG, launched on May 8, 2007, follows the equity index called StrataQuant Consumer Staples Index. FXG is made up of 39 consumer staples securities, with the top holdings being Constellation Brands, Inc. (NYSE:STZ ), The Kroger Co. (NYSE:KR ) and Rite Aid Corporation (NYSE:RAD ). The fund’s expense ratio is 0.69%, and the dividend yield is 1.19%. It had $2.59 billion in assets under management as of February 12, 2015.

Guggenheim S&P 500 Equal Weight Consumer Staples ETF (NYSEARCA:RHS ):

Launched on November 1, 2006, RHS is an ETF that seeks investment results corresponding to the S&P 500 Equal Weight Consumer Staples Index. This is an equal-weighted fund and constitutes 39 stocks, with the top holdings being Constellation Brands, Inc. Kroger and Whole Foods Market, Inc. (NASDAQ:WFM ). The fund’s expense ratio is 0.40%, and it pays out a dividend yield of 1.68%. RHS had about $269.4 million in assets under management as of January 30, 2015.

Fidelity MSCI Consumer Staples Index ETF (NYSEARCA:FSTA ):

FSTA, launched on October 21, 2013, is an ETF that seeks investment results corresponding to the MSCI USA IMI Consumer Staples Index. This is a cap-weighted fund and constitutes 99 stocks, with the top holdings being Procter & Gamble, Coca-Cola and PepsiCo. The fund’s expense ratio is 0.12%, and the dividend yield is 2.20%. FSTA had about $209.5 million in assets under management as of January 31, 2015.