Bad and ugly consumer staples etfs


If you want to be in a sector etf, consumer staples is the only place to shop.Equity etf strategic roadmap report), this sector has by far the best companies and the most market value allocated to the best companies.Watch out, though, not all etfs are made the ralph lauren online shop same.

Despite the predominance of attractive rated stocks in the consumer staples sector, there are still etfs that investors should be careful to avoid.See below how the consumer staples sector's stocks and the ralph lauren donna pantaloni market value attributed to them stack up under the microscope of our risk/reward stock rating system.

The consumer staples sector has only 3% of its value invested in dangerous or worse rated stocks and 73% of its value invested in attractive or better rated stocks.The consumer staples sector is the only sector that has an attractive overall risk/reward rating because of its superior allocation to attractive or better rated stocks.

The key takeaway here is that it would seem difficult for investors to go wrong when selecting a consumer staples etf because there are few dangerous or very dangerous stocks, and, those stocks ralph lauren donna big pony polo have very little market value.A consumer staples etf would have to allocate more value to small dangerous or very dangerous stocks to be worse than the overall sector.

To test our theory, we analyzed the holdings and allocations for the top 6 consumer staples etfs(Listed below)By market cap according to marco polo xtf.

Select sector spdr consumer staples(Xlp):40 cap weighted holdings

Vanguard consumer staples index fund(Vdc):109 cap weighted holdings

Powershares dynamic food and beverage(Pbj):30 cap weighted holdings

Powershares dynamic consumer staples ralph lauren bambini milano sector(Psl):59 equal weighted holdings

Rydex s equal weight consumer staples(Rhs):41 equal weighted holdings

First trust consumer staples alphadex fund(Fxg):37 holdings weighted according to"Various fundamentals"

The first thing i noticed was that each of the etfs has a meaningfully different number of holdings and, therefore, different allocations to holdings as well.Right away, i knew that given the differences in holdings and allocations, these etfs would likely perform quite differently.

Figure 2 shows how the consumer staples sector etfs stack up versus each other and the overall sector based on risk/reward of their allocations.

The other 5 etfs found a way to allocate the value of the fund in a way that makes them less attractive than the overall sector.We recommend investors buy the very attractive and attractive stocks in this sector before buying any of the consumer staples etfs except xlp.

Figure 2:Comparing the allocations of the consumer staples sector etfs

We recommend investors avoid fxg, which allocates significantly more value to dangerous and very dangerous rated holdings and much less to attractive and very attractive rated holdings.Figure 3 highlights just how different that fxg is compared to xlp and the overall sector.Given how few and the small market value of the dangerous and very dangerous rated stocks in the consumer staples sector, one has to wonder how first trust advisors lp, the issuer of fxg, determined it should allocate so much value to dangerous and very dangerous rated holdings.Marco polo xtf defines their index composition strategy as based on"Various fundamentals".They are certainly not looking at the same fundamentals as we.Perhaps, they are overlooking the key data from financial footnotes that we painstakingly gather and analyze.

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