Stock Market News

Invest in Household Names with This Staples Fund

The market has turned away from technology and growth darlings, while value stocks have, on a relative basis, become more prized by investors.

So-called “boring” companies often offer consistent, stable returns, and tend to hold their value more strongly in downturns. However, they are unlikely to offer massive returns over a short time the way some of the tech stocks do.

Still, there is something to be said for sound fundamentals. The consumer staples industry tends more towards “boring” stocks and business models. These stalwart companies, however, provide services that consumers need and will just about always demand, at least in the intermediate term.

They are called “staples” for a reason. Represented industries include food and other staples such as retail, beverages, tobacco and household products.

Perhaps the most “boring” way to invest in these stocks is through Consumer Staples Select Sector SPDR Fund (XLP). The Select Sector funds are well-known in the exchange-traded fund (ETF) space for providing exposure to some of the biggest companies in a sector, and this one is no different. As investing in equities goes, ETFs generally provide a measure of safety and reduce volatility compared to investing in single stocks.

In recent periods — one month, three months, six months, year to date or one year — XLP has outperformed the S&P 500 by two to seven percentage points, and that’s not including its 2.5% yield. This is representative of the investing trend in favor of this industry. Plus, a 0.10% expense ratio of this fund is quite low.

The fund’s assets under management recently totaled $15.18 billion.

Exclusive Return of the Real

Chart courtesy of www.StockCharts.com.

XLP’s holdings tend to be large-cap household names. Some of the most heavily weighted companies represented are Procter & Gamble Co. (PG), 15.8%; Costco Wholesale Corp. (COST), 10.6%; Coca-Cola Co. (KO), 10.14%; PepsiCo Inc. (PEP), 9.62%; and Altria Group Inc. (MO), 4.91%. There are 32 holdings in total.

For investors looking for a careful, more stable way to remain invested in equities during this turbulent time, Consumer Staples Select Sector SPDR Fund (XLP) offers just such an ETF.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.