Exchange Traded Funds (ETFs)

Analyzing a ‘Basic’ ETF

As global uncertainty continues to thrive due to supply disruptions caused by the COVID-19 pandemic and the war in Ukraine, while inflation boosts the price of many consumer staples, the continued importance of consumer goods to both investors and consumers has been underscored.

One exchange-traded fund (ETF) that is heavily involved in consumer staples stocks should be familiar to my Intelligence Report subscribers: Vanguard Consumer Staples ETF (NYSEARCA: VDC). This ETF tracks a market-cap weighted index of stocks belonging to American companies that are somehow involved with the Consumer Staples sector.

This fund’s managers focus on pure-play consumer staples exposure, meaning that the basket of stocks in this fund attempts to cover wide breath and representation. While the fund tracks an all-cap index, the stocks in it are selected and weighted by market capitalization. To avoid overrepresentation, the managers have followed regulations established by the U.S. Internal Revenue Code and established an investment limit no more than 25% of the value to a single issuer and more than 5%, not exceeding 50%, of total assets.

Currently, the fund’s top holdings include Procter & Gamble Co. (NYSE: PG), Coca-Cola Company (NYSE: KO), Costco Wholesale Corp. (NASDAQ: COST), PepsiCo, Inc. (NASDAQ: PEP), Walmart Inc. (NYSE: WMT), Philip Morris International Inc. (NYSE: PM), Mondelez International, Inc. (NASDAQ: MDLZ) and Altria Group Inc. (NYSE: MO).

As of March 22, VDC has dipped 0.27% over the past month and 0.26% for the past three months. It currently is down 2.93% year to date.

Chart courtesy of www.stockcharts.com

The fund has amassed $6.67 billion in assets under management and has an expense ratio of 0.10%.

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In short, while VDC does provide an investor with a way to profit from consumer staples, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors should always conduct their due diligence and decide whether the fund is suitable for their investing goals.

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.