S&P Bullish On Select Staples ETFs

In a market environment such as the current one, themes such as “holding up relatively well” and “less bad” are themes worth embracing and those are tags that can be applied to the ultra-defensive consumer staples sector. Home to what many investors view as boring stocks, but also home to some nice dividend yields, staples are often viewed as an ideal defensive play and there are an array of ETFs for investors to choose from. Standard & Poor's Equity Strategy recently raised its rating on the group to “overweight” from “market weight,” saying that it thought the sector's defensive characteristics and above-average 2.9% dividend yield position the sector for outperformance. The firm placed “overweight” ratings on five staples ETFs: The Consumer Staples Select Sector SPDR XLP, the iShares Dow Jones US Consumer Goods Index Fund IYK, the iShares S&P Global Consumer Staples Index Fund KXI, the Morningstar Consumer Defensive Index ETF FCD and the Vanguard Consumer Staples ETF VCD. All five funds offer significant exposure to Dow components Coca-Cola KO, Procter & Gamble PG and Wal-Mart WMT. PepsiCo PEP and tobacco firms are also featured prominently in all five ETFs. Only KXI does not feature P&G as its top holding. The maker of Tide laundry products is that ETF's second-largest holding behind Nestle NSRGY, the world's largest food company. S&P Equity Strategy thinks the recent broad-based decline in commodity input costs is another positive for consumer staples, as is a bullish technical outlook, the firm said in a report. With roughly $4.2 billion in assets under management, XLP is by far the largest staples ETF. P&G accounts for over 14% of XLP's weight. Twelve of the 14 ETFs that offer staples exposure fall under S&P's coverage universe. The firm as a “marketweight” rating on the PowerShares Dynamic Food & Beverage Portfolio PBJ, a staples-oriented ETF with some discretionary exposure through allocations to stocks such as McDonald's MCD and Starbucks SBUX. PBJ and XLP are both up about 4% in the past month.