Consumer Staples are considered a more conservative and defensive sector. After all, no matter the economic conditions people still need “stuff” from soap to toothpaste. The earnings growth rate for these companies is more limited due to intensive competition as big box retailers have forced prices to remain lower. Big box retailers (Walmart and others) have also been able to dictate pricing terms to suppliers putting a squeeze on them. This has kept consumer prices lower no matter the pressure it puts on the small drug store around the corner.
A defensive sector like Consumer Staples will outperform when equity markets are more bearish and underperform when bullish. They will trend in the same manner overall but still with less beta or volatility since as indicated, even the worst of times, people will need stuff.
There is a wide array of ETFs devoted to the sector providing U.S. and global exposure. Most are linked to established indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones, Wisdom Tree, PowerShares, EG Shares and so forth. Also included are some so-called “enhanced” indexes that attempt to achieve better performance through more active management of the index
New issues are coming to market consistently (especially globally) and sometimes these issues will need to become more seasoned before they may be included in our listings.
We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short if suitable to your tastes.
Premium members to the ETF Digestreceive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.
For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.
#10: SPDR S&P International Consumer Staples ETF (IPS)
IPS follows the S&P Developed ex-U.S. BMI Consumer Staples Sector Index which represents non-U.S. consumer staples companies with market capitalizations of at least $100 million. The fund was launched in July 2008. The expense ratio is .50%. AUM equal $18 million and average daily trading volume is 10K shares.
As of mid-February 2012 the annual dividend yield was 2.72% and YTD 1.44%. The one year return was 8.59%.
RHS follows the S&P Equal Weight Consumer Staples Index which as the name implies just breaks down the same sector ETF as XLP into equal weights. The fund was launched in November 2006. The expense ratio is .50%. AUM equal $30 million with average daily trading volume of 7K shares.
The fund has struggled from a marketing perspective given company ownership changes which left it adrift for a period. This could now change with new ownership. As of mid-February 2012 the annual dividend yield was 2.77% and YTD 1.05%. The one year return was 14.72%.
PSL follows the Dynamic Consumer Staples Sector Intellidex Index which is considered an “enhanced” index since it uses proprietary quantitative analysis to more actively deploy and manage constituents. Of some interest are the more even weightings of the holdings versus others already listed. The fund was launched in October 2010. The expense ratio is .60%. AUM equal $38 million with average daily trading volume of 7K shares. As of mid-February 2012 the annual dividend yield was 1.48% and YTD 1.70%. The one year return was 11.94%.
Another choice from the same sponsor is PSCC which follows the S&P SmallCap 600 Consumer Staples Index. The fund was launched in April 2010. Its expense ratio is .29%. AUM equal $13 million and average daily trading volume is 10K shares. As of late July 2011 the yield was just under 3% and YTD return 5.87%.
PBJ ETF follows the Dynamic Food & Beverage Intellidex Index which another “enhanced” index from PowerShares that is more active in using quantitative analysis to select and manage the index. The fund was launched in June 2005.
The expense ratio is .60%. AUM equal $130 million and average daily trading volume is 135K shares. As of mid-February 2012 the annual dividend yield was .96% and YTD 1.88%. The one year return was 7.75%.
FXG follows the StrataQuant Consumer Staples Index which is another “enhanced” index which employs the AlphaDEX stock selection methodology to select consumer staples stocks from the Russell 1000. The fund was launched in May 2007. The expense ratio is .70%.
AUM equal $205 million with average daily trading volume of 185K shares. As of mid-February 2012 the annual dividend yield was .76% and YTD 2.79%. The one year return was 12.19%.
Data as of First Quarter 2012
FXG Top Ten Holdings & Weightings
Smithfield Foods, Inc. (SFD): 5.58%
Tyson Foods, Inc. A (TSN): 5.33%
Hormel Foods Corporation (HRL): 4.86%
Whole Foods Market, Inc. (WFM): 4.78%
Hansen Natural Corporation (MNST): 4.73%
Herbalife, Ltd. (HLF): 4.32%
Archer-Daniels Midland Company (ADM): 4.14%
Constellation Brands Inc. A (STZ): 4.12%
Kroger Co (KR): 3.96%
ConAgra Foods, Inc. (CAG): 3.91%
#5: EG Shares DJ Emerging Market Consumer ETF (ECON)
ECON follows the Dow Jones Emerging Markets Titans Index which is a market cap weighted index of the 30 leading emerging market companies in both consumer goods and services. The fund was launched in September 2010. The expense ratio is .85%. AUM equal $352 million and average daily trading volume is 140K shares.
As of mid-February 2012 the annual dividend yield was .53% and YTD return 8.28%. The one year return was 11.92%.
Data as of First Quarter 2012
ECON Top Ten Holdings & Weightings
Companhia de Bebidas das Americas Ambev ADR (ABV): 11.17%
Naspers Ltd (NPN): 7.97%
Wal - Mart de Mexico, S.A.B. de C.V. (WALMEX V): 7.69%
Astra International Tbk (ASII): 7.58%
BRF - Brasil Foods SA ADR (BRFS): 6.34%
FomentoEconomicoMexicano SAB de CV (FEMSA UBD): 6.10%
KXI follows the S&P Global Consumer Staples Index which includes the U.S. and other nation’s consumer staples issues. The fund was launched in September 2006. The expense ratio is .48%. AUM equal $459 million and average daily trading volume is 42K shares.
As of mid-February 2012 the annual dividend yield was 2.36% and YTD return 1.47%. The one year return was 12.51%.
IYK follows the Dow Jones U.S. Consumer Goods Index. The fund was launched in June 2006. The expense ratio is .48%. AUM equal $380 million and average daily trading volume is 48K shares. As of mid-February 2012 the annual dividend yield was 2.09% and YTD return 4.06%. The one year return was 11.27%.
An alternative choice is the FocusShares Morningstar Consumer Defensive ETF (FCD) which is a venture of Scottrade and Morningstar featuring a lower expense ratio (.19%) and no trading commissions for Scottrade customers. You’ll no doubt see something similar coming from Schwab soon enough.
VDC follows the MSCI US Investable Market Consumer Staples 25/50 Index covering the entire spectrum of food, personal products, tobacco, beverage, drug stores and mega centers. The fund was launched in January 2004. The expense ratio is .25%.
AUM equal $931 million and average daily trading volume is 96K shares. As of mid-February 2012 the annual dividend yield was 2.35% and YTD return 1.49%. The one year return was 14.82%
SPDR Consumer Staples Select Sector ETF covers the Consumer Staples Select Sector Index which includes food and staples retailing, household products, beverages, tobacco and personal products. The fund was launched in December 1998. The expense ratio is .19%.
AUM (Assets under Management) equal $4.9 billion with average daily trading volume of 7M shares. As of mid-February 2012 the annual dividend yield was 2.77% and YTD return 1.05%. The one year return was 14.72%
For traders and investors wishing to hedge, leveraged and inverse issues are available closely matching XLP’s performance to utilize from ProShares.
Data as of First Quarter 2012
XLP Top Ten Holdings & Weightings
Procter & Gamble Co (PG): 13.78%
Philip Morris International, Inc. (PM): 10.32%
Wal-Mart Stores Inc (WMT): 8.52%
Coca-Cola Co (KO): 7.14%
Kraft Foods Inc (KFT): 5.38%
CVS Caremark Corp (CVS): 4.84%
Altria Group Inc. (MO): 4.64%
PepsiCo Inc (PEP): 4.10%
Colgate-Palmolive Company (CL): 3.81%
Costco Wholesale Corporation (COST): 3.15%
Below is the methodology for ranking the ETFs within the category.
Strong established linked index Excellent consistent performance and index tracking Low fee structure Strong portfolio suitability Excellent liquidity
Established linked index even if “enhanced” Good performance or more volatile if “enhanced” index Average to higher fee structure Good portfolio suitability or more active management if “enhanced” index Decent liquidity
Enhanced or seasoned index Less consistent performance and more volatile Fees higher than average Portfolio suitability would need more active trading Average to below average liquidity
Index is new Issue is new and needs seasoning Fees are high Portfolio suitability also needs seasoning Liquidity below average
The consumer staples sector enjoyed a positive first half of 2011 but corrected with the overall market in the second half of the year. Since late November 2011 the market has recovered sharply and is now overbought as of this early 2012 report.
The consumer sector is marked by positive demographics overseas in emerging markets which has made ECON attractive even with the greater volatility. With the latter investors need to adopt more agile tactics as they should with enhanced index related ETFs.
There is a lot to choose from in terms of indexes linked to ETFs. Some are passive and duplicative relatively. It’s essential to remember it’s really a game of battleship for sponsors seeking to be first to a sector space or just being competitive in the space. This is their business interest apart from your investment interest. You should always ignore their interests and align your choices with what serves your objectives best.
New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab’s ETFs and Scottrade’s Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned.
For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest. Follow us on Twitter and Facebook as well and join our group conversations.
Consumer Staples are considered a more conservative and defensive sector. After all, no matter the economic conditions people still need “stuff” from soap to toothpaste. The earnings growth rate for these companies is more limited due to intensive competition as big box retailers have forced prices to remain lower. Big box retailers (Walmart and others) have also been able to dictate pricing terms to suppliers putting a squeeze on them. This has kept consumer prices lower no matter the pressure it puts on the small drug store around the corner.
A defensive sector like Consumer Staples will outperform when equity markets are more bearish and underperform when bullish. They will trend in the same manner overall but still with less beta or volatility since as indicated, even the worst of times, people will need stuff.
There is a wide array of ETFs devoted to the sector providing U.S. and global exposure. Most are linked to established indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones, Wisdom Tree, PowerShares, EG Shares and so forth. Also included are some so-called “enhanced” indexes that attempt to achieve better performance through more active management of the index
New issues are coming to market consistently (especially globally) and sometimes these issues will need to become more seasoned before they may be included in our listings.
We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short if suitable to your tastes.
Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.
For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.
#10: SPDR S&P International Consumer Staples ETF (IPS)
IPS follows the S&P Developed ex-U.S. BMI Consumer Staples Sector Index which represents non-U.S. consumer staples companies with market capitalizations of at least $100 million. The fund was launched in July 2008. The expense ratio is .50%. AUM equal $18 million and average daily trading volume is 10K shares.
As of mid-February 2012 the annual dividend yield was 2.72% and YTD 1.44%. The one year return was 8.59%.
Data as of First Quarter 2012
IPS Top Ten Holdings & Weightings
#9: Rydex S&P Equal Weight Consumer Staples ETF (RHS)
RHS follows the S&P Equal Weight Consumer Staples Index which as the name implies just breaks down the same sector ETF as XLP into equal weights. The fund was launched in November 2006. The expense ratio is .50%. AUM equal $30 million with average daily trading volume of 7K shares.
The fund has struggled from a marketing perspective given company ownership changes which left it adrift for a period. This could now change with new ownership. As of mid-February 2012 the annual dividend yield was 2.77% and YTD 1.05%. The one year return was 14.72%.
Data as of First Quarter 2012
RHS Top Ten Holdings & Weightings
#8: PowerShares Dynamic Consumer Staples ETF (PSL)
PSL follows the Dynamic Consumer Staples Sector Intellidex Index which is considered an “enhanced” index since it uses proprietary quantitative analysis to more actively deploy and manage constituents. Of some interest are the more even weightings of the holdings versus others already listed. The fund was launched in October 2010. The expense ratio is .60%. AUM equal $38 million with average daily trading volume of 7K shares. As of mid-February 2012 the annual dividend yield was 1.48% and YTD 1.70%. The one year return was 11.94%.
Another choice from the same sponsor is PSCC which follows the S&P SmallCap 600 Consumer Staples Index. The fund was launched in April 2010. Its expense ratio is .29%. AUM equal $13 million and average daily trading volume is 10K shares. As of late July 2011 the yield was just under 3% and YTD return 5.87%.
Data as of First Quarter 2012
PSL Top Ten Holdings & Weightings
#7: PowerShares Dynamic Food & Beverage ETF (PBJ)
PBJ ETF follows the Dynamic Food & Beverage Intellidex Index which another “enhanced” index from PowerShares that is more active in using quantitative analysis to select and manage the index. The fund was launched in June 2005.
The expense ratio is .60%. AUM equal $130 million and average daily trading volume is 135K shares. As of mid-February 2012 the annual dividend yield was .96% and YTD 1.88%. The one year return was 7.75%.
Data as of First Quarter 2012
PBJ Top Ten Holdings & Weightings
#6: First Trust Consumer Staples ETF (FXG)
FXG follows the StrataQuant Consumer Staples Index which is another “enhanced” index which employs the AlphaDEX stock selection methodology to select consumer staples stocks from the Russell 1000. The fund was launched in May 2007. The expense ratio is .70%.
AUM equal $205 million with average daily trading volume of 185K shares. As of mid-February 2012 the annual dividend yield was .76% and YTD 2.79%. The one year return was 12.19%.
Data as of First Quarter 2012
FXG Top Ten Holdings & Weightings
#5: EG Shares DJ Emerging Market Consumer ETF (ECON)
ECON follows the Dow Jones Emerging Markets Titans Index which is a market cap weighted index of the 30 leading emerging market companies in both consumer goods and services. The fund was launched in September 2010. The expense ratio is .85%. AUM equal $352 million and average daily trading volume is 140K shares.
As of mid-February 2012 the annual dividend yield was .53% and YTD return 8.28%. The one year return was 11.92%.
Data as of First Quarter 2012
ECON Top Ten Holdings & Weightings
#4: iShares S&P Global Consumer Staples ETF (KXI)
KXI follows the S&P Global Consumer Staples Index which includes the U.S. and other nation’s consumer staples issues. The fund was launched in September 2006. The expense ratio is .48%. AUM equal $459 million and average daily trading volume is 42K shares.
As of mid-February 2012 the annual dividend yield was 2.36% and YTD return 1.47%. The one year return was 12.51%.
Data as of First Quarter 2012
KXI Top Ten Holdings & Weightings
#3: iShares DJ U.S. Consumer Goods ETF (IYK)
IYK follows the Dow Jones U.S. Consumer Goods Index. The fund was launched in June 2006. The expense ratio is .48%. AUM equal $380 million and average daily trading volume is 48K shares. As of mid-February 2012 the annual dividend yield was 2.09% and YTD return 4.06%. The one year return was 11.27%.
An alternative choice is the FocusShares Morningstar Consumer Defensive ETF (FCD) which is a venture of Scottrade and Morningstar featuring a lower expense ratio (.19%) and no trading commissions for Scottrade customers. You’ll no doubt see something similar coming from Schwab soon enough.
IYK Top Ten Holdings & Weightings
Data as of First Quarter 2012
#2: Vanguard Consumer Staples ETF (VDC)
VDC follows the MSCI US Investable Market Consumer Staples 25/50 Index covering the entire spectrum of food, personal products, tobacco, beverage, drug stores and mega centers. The fund was launched in January 2004. The expense ratio is .25%.
AUM equal $931 million and average daily trading volume is 96K shares. As of mid-February 2012 the annual dividend yield was 2.35% and YTD return 1.49%. The one year return was 14.82%
Data as of First Quarter 2012
VDC Top Ten Holdings & Weightings
#1: SPDR Consumer Staples Select Sector ETF (XLP)
SPDR Consumer Staples Select Sector ETF covers the Consumer Staples Select Sector Index which includes food and staples retailing, household products, beverages, tobacco and personal products. The fund was launched in December 1998. The expense ratio is .19%.
AUM (Assets under Management) equal $4.9 billion with average daily trading volume of 7M shares. As of mid-February 2012 the annual dividend yield was 2.77% and YTD return 1.05%. The one year return was 14.72%
For traders and investors wishing to hedge, leveraged and inverse issues are available closely matching XLP’s performance to utilize from ProShares.
Data as of First Quarter 2012
XLP Top Ten Holdings & Weightings
Below is the methodology for ranking the ETFs within the category.
Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity
Established linked index even if “enhanced”
Good performance or more volatile if “enhanced” index
Average to higher fee structure
Good portfolio suitability or more active management if “enhanced” index
Decent liquidity
Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity
Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average
The consumer staples sector enjoyed a positive first half of 2011 but corrected with the overall market in the second half of the year. Since late November 2011 the market has recovered sharply and is now overbought as of this early 2012 report.
The consumer sector is marked by positive demographics overseas in emerging markets which has made ECON attractive even with the greater volatility. With the latter investors need to adopt more agile tactics as they should with enhanced index related ETFs.
There is a lot to choose from in terms of indexes linked to ETFs. Some are passive and duplicative relatively. It’s essential to remember it’s really a game of battleship for sponsors seeking to be first to a sector space or just being competitive in the space. This is their business interest apart from your investment interest. You should always ignore their interests and align your choices with what serves your objectives best.
New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab’s ETFs and Scottrade’s Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned.
For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest. Follow us on Twitter and Facebook as well and join our group conversations.
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The ETF Digest has no current positions in any of the featured ETFs.
(Source for data is from ETF sponsors and various ETF data providers.)