By Doug Fabian
When most people think of the agricultural sector, farming is most likely to come to mind. However, by focusing on only production, people miss the end result of consumption. There are relatively few farmers producing food, but everyone eats it. An exchange-traded fund which profits from this reality is PowerShares Dynamic Food & Beverage (PBJ).
This non-diversified exchange-traded fund (ETF) with a humorous ticker symbol seeks investment results which, before fees and expenses, correspond generally to the performance of an index that tracks 30 U.S. food and beverage companies. These companies are involved in the manufacture, sale or distribution of food and beverages, agricultural products and products related to the development of new food technologies.
PBJ has done very well so far this year, rocketing more than 20%. Investors looking to gain additional income can sink their teeth into the ETF’s solid 1.42% dividend yield. With PBJ in an evergreen industry, since people always need to eat, the fund should continue to do reasonably well amid an economic slowdown.
The vast majority of PBJ’s assets, 83.78%, are invested in the consumer defensive sector, while the remainder of the fund’s investment is in the consumer cyclical, 11.23%, and basic materials, 4.99%, sectors. In terms of individual companies, PBJ’s top ten holdings comprise 45.62% of its total assets. The top seven of these are well-known household names: Mondelez International, Inc. (formerly part of Kraft Foods) (MDLZ), 5.10%; The Hershey Company (HSY), 5.04%; Monsanto Company (MON), 4.99%; General Mills, Inc. (GIS), 4.98%; Kellogg Company (K), 4.95%; PepsiCo, Inc. (PEP), 4.93%; and Whole Foods Market, Inc. (WFM), 4.90%.
While most companies tied to the agricultural sector move up and down in conjunction with harvest season and the success of a particular crop, PBJ is largely immune to this volatility due to the previously stated need for people to eat, regardless of the economy. This stability should mean continued profits for funds like PBJ and, by extension, those who invest in them. Dig in.
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