Some might say it is a sign that the rally is losing steam and
stocks are set to pullback in the near-term. Whatever the
motivation may be, buyers have stepped into consumer staples in
recent weeks, sending the likes of Procter & Gamble (NYSE:
), Kimberly-Clark (NYSE:
) and Clorox (NYSE:
) to fresh highs.
That trend has been excellent news for the Consumer Staples
Select SPDR (NYSE:
). XLP had $5.75 billion in assets under management as of
February 5, making it the largest staples ETF by that metric.
With an expense ratio of 0.18 percent, XLP is by no means
XLP, which is home to familiar names such as P&G,
) and Wal-Mart (
), among others, has a history of being a solid performer. Over
the past year, two years and five years, the fund has delivered
returns that investors are not apt to quibble about and XLP has
kept up that tradition this year, gaining 4.2 percent on a
However, with signs emerging that staples stocks are in vogue,
investors may want to consider alternatives to XLP.
Interestingly, recent returns indicate that could be a wise move
as 2013 goes along.
Vanguard Consumer Staples ETF (NYSE:
) The Vanguard Consumer Staples ETF is the staples fund that is
most comparable to XLP in terms of size and holdings. Both are
the sector's most familiar names
such as P&G, Coca-Cola PepsiCo (NYSE:
) and Costco (NASDAQ:
On the surface, it would appear the differences between these
are almost non-existent. However, there is one key element to the
equation that long-term investors should not overlook. Just
before the end of 2012, Vanguard announced an array of fee
reductions for some of its ETFs. That announcement included a fee
cut for VDC, which now has annual expenses of 0.14 percent
compared to 0.18 percent for XLP. Four basis points does not
sound like much, but over time periods of multiple years, it can
make a difference. As it is, VDC is already slightly outpacing
XLP on a year-to-date basis.
First Trust Consumer Staples AlphaDEX Fund (NYSE:
) The First Trust Consumer Staples AlphaDEX Fund
keeps with the tradition of the compelling
. That includes weighting components based growth and value
factors such as price appreciation and cash flow to price.
That leads to a lineup that is starkly different than what is
found with XLP or VDC. For example, FXG's second-largest holding
accounting for over five percent of the ETF's weight is the
controversial and volatile Green Mountain Coffee Roasters
). Yes, FXG does feature allocations to more standard staples
fare such as P&G and Kellogg (NYSE:
), but those names reside further down the fund's lineup with
allocations well below two percent apiece.
Not to mention, FXG is pricey with a 0.7 percent annual
expense ratio. However, investors have been rewarded by FXG. The
ETF is up over fiver percent year-to-date, indicating it offers a
valid way of playing the staples sector with a near- to
Global X Brazil Consumer ETF (NYSE:
) Investing in Brazil via ETFs
has become a tricky gambit due to the plunge
in the country's state run oil giant Petrobras (NYSE:
). In other words, investors looking to profit with a
Brazil-specific ETF would do well to ensure that fund has minimal
to no exposure to Petrobras.
The Global X Brazil Consumer ETF fits the bill. BRAQ is home
to over 30 stocks and not one of them is Petrobras. It must be
noted that BRAQ is not a pure staples play as
discretionary-related names equal about 35 percent of the fund's
weight, but the remainder of the ETF is allocated to food and
beverage and household goods names.
A bull thesis for BRAQ would include low unemployment in
Brazil, delinquencies, rising salaries and record-low interest
according to Reuters
. Dangers for BRAQ include four consecutive months of declining
consumer confidence and a consumer loan default rate that rose to
7.9 percent in December from 7.8 percent in November. That data
has been reported this year and has not yet deterred BRAQ from
gaining almost five percent.
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(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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