Beware the Wal-Mart Supplier ETF

Stock quotes in this article: TGT , CVS , MMT , WSI , CALM , XLP  

I have no position in Wal-Mart and have no plans to buy the stock, but it is a safe bet that at some point Wal-Mart will outperform the suppliers index. The way I view these sorts of things, the index's past outperformance and any future performance vs. Wal-Mart will not be the important thing. The important thing is what role this fund could play in a diversified portfolio.

The fund, not surprisingly, is most heavily weighted toward consumer staples stocks, at roughly 48%, followed by consumer discretionary stocks, at 20% and then technology stocks (think video games) at 17%.

I was not able to find market-cap information on the FocusShares website, so by my rough calculation the average market cap is $3.3 billion, with six companies below $500 million. WSI, as a proxy for consumer stocks, is obviously going to capture the smaller part of the sector.

The fund's sales literature compares its benchmark index to the S&P Retail Index, which is composed of stores like Wal-Mart, CVS Caremark (CVS Quote)and Target(TGT Quote).

Measuring Up
WSI's benchmark index (WMX) has had a low correlation to the S&P Retail Index.
Click here for larger image.
Source: focusshares.com

WSI's benchmark index has had a low correlation to the S&P Retail Index, but I don't think it is a good comparison. Since WSI is mostly consumer stocks, it makes sense to compare the fund with the Staples Sector SPDR (XLP Quote), which also owns a lot of companies that make products sold in Wal-Mart -- and to Wal-Mart's competitors.

  • Loading Comments...
  •  

SHARE:

  • email
  • print
  • comment
  • digg
  • delicious
  • linkedin




Connect with TheStreet

Dow Jones S&P 500 NASDAQ 10-Year Note
10,246.97 1,093.01 2,151.08 34.82
Oil *
77.27
UP
20.03
DOWN
0.06
DOWN
2.98
DOWN
0.04
10 Yr
3.48%
SPDR Gold
108.39
+0.20%
-0.01%
-0.14%
-0.11%
Data delayed 20 minutes

Brokerage Partners

TheStreet Premium Services

All Services