The consumer staples sector, the sixth-largest sector weight
in the S&P 500, is not usually thought of as being
controversial. Compare the staples group at large to the
financial services and energy sectors, staples are usually boring
when it comes to generated controversy. An argument can even be
made that, for different reasons, health care and materials
stocks are often more controversial than staples names.
At least that is how things usually are, but what is typical
when it comes to boring old staples stocks has been thrown out
the window in recent months. It can even be said that the sector
has been home to a firestorm of controversy. However, despite
some negative headlines pertaining to marquee names in the
sector, consumer staples have remained solid in recent
Take the example of Procter & Gamble (NYSE:
). The Ohio-based Dow component is the world's largest consumer
products company and is the largest holding in the Consumer
Staples Select Sector SPDR (NYSE:
), Vanguard Consumer Staples ETF (NYSE:
) and the iShares Dow Jones U.S. Consumer Goods Sector Index Fund
P&G is not usually a stock that can be deemed
controversial, but the stock has seen its share of unsolicited
press since July when it was revealed activist investor
Bill Ackman took a stake in the company
. Common logic has been that Ackman is either angling for
significant management changes, for P&G to spin-off more
non-essential brands to unlock shareholder value or both.
Despite what has the potential to be an acrimonious
relationship between Ackman and P&G, the aforementioned
staples ETFs have been quite sturdy. That is the case with
weights to P&G of 13.6 percent for XLP, 10.7 percent for VDC
and almost 12.2 percent for IYK.
Then there was the decision by New York City to ban sales of
soda and other sweetened drinks in serving sizes larger than 16
ounces. Over the past month, shares of Coca-Cola (NYSE:
), the world's largest soft-drink maker, are up 2.5 percent. That
gain essentially cancels out the 2.6 percent decline for rival
) over the same time.
There are couple of points to remember about the New York soda
ban when it comes the potential impact the ban may have going
forward on staples ETFs. First, New York and California have a
tendency to implement these types of measures (for example, foie
gras is illegal in California), but that does not mean what flies
in Manhattan or San Francisco will fly in Des Moines or
To that end, Coca-Cola and Pepsi products are not completely
banned in New York and these truly global companies being talked
The pair combine for 15 percent of XLP's weight, almost 17
percent of VDC's weight and 16.4 of IYK's, but the ETFs are all
higher in the past month.
Of course, it cannot be forgotten that tobacco stocks fall
under staples jurisdiction and tobacco names are always
controversial. Philip Morris (NYSE:
), which is more focused on global sales, and Altria (NYSE:
) combine for over 15 percent of XLP's weight.
This is noteworthy because, these days, it is not just the
U.S. that is taking are hard stand against smoking and big
tobacco companies. Countries from Singapore
to India and plenty of others
are cracking down on tobacco consumption.
Still, Philip Morris is up almost four percent in the past 90
days. Pair Philip Morris with Altira and that is 14.1 percent of
VDC's weight and 14 percent of IYK's weight. Something to keep in
mind about smoking bans: In 1998, California became the first
state to implement a wide-ranging smoking ban and the ban has
only grown in scope since then. In that time, shares of Altria
have more than tripled.
Bottom line: Staples ETFs may be home to more controversy than
investors would expect, but these funds have proven resilient in
the face of less-than-cooperative headlines.
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