Some of the best known companies in the world outside of the technology sector are companies in the consumer staples sector. Examples include Procter & Gamble, Philip Morris, Wal-Mart, Coca Cola and Kraft Foods. The easiest way to invest in the sector is to own an exchange traded fund (ETF) that holds a basket of these stocks. U.S. exchanges list 17 ETFs in the sector.
The consumer staples Sector includes companies in the food and staples retailing, household products, food products, beverages, tobacco and personal products industries.
By far the most actively traded ETF in the sector is Consumer Staples SPDRs . Units track the performance of 42 consumer staple stocks that are part of the S&P 500 Index. The portfolio is capitalization weighted. Top five holdings in the portfolio as listed above represent 45 per cent of the portfolio. Management expense ratio is 0.20 per cent.
Other active ETFs in the sector include Vanguard Consumer Staples ETF , iShares S&P Global Consumer Staples Index Fund and iShares Dow Jones U.S. Consumer Goods Sector Index Fund . All are capitalization weighted. All hold a more diversified portfolio than Consumer Staples SPDRs with more than 100 holdings. Content of iShares S&P Global Consumer Staples Index is slightly different with inclusion of stocks such as Nestle, British American Tobacco and Unilever. Management expense ratio for the Vanguard Consumer Staples ETF is 0.25 per cent. Management expense ratio for the iShares products is 0.48 per cent.
Several sub sector ETFs are available. They include PowerShares Dynamic Food & Beverage Portfolio , Dow Jones Emerging Markets Consumer Titans Index Fund , Global X Food ETF and Fish Industry ETF .
The consumer staples sector is known to be a defensive sector for investment purposes. It tends to be a safe haven in the summer time when equity markets are most volatile. Seasonal influences are strongest between the end of September and the end of December.
The S&P Consumer Staples Index currently has a negative technical profile with positive possibilities. Intermediate trend is down. Units trade below their 50-day moving average. However, support has formed at 290.40, the index moved above its 200-day moving average on Friday and short-term momentum indicators are recovering from oversold levels. In addition, strength relative to the S&P 500 Index has been positive since mid February.
Preferred strategy is to accumulate ETFs in the sector on weakness near its seasonal low in September with the intention of participating in the seasonal trade to the end of December.
Don Vialoux is author of a free daily report on equity markets, sectors, commodities and Exchange Traded Funds. Reports are available at www.timingthemarket.ca . Mr. Vialoux also is research analyst for JovInvestment Management Inc.