Consumer ETF Takes Different Route
NEW YORK ( TheStreet) -- Thanks to our implicit desire to meet basic needs and feed addictions, consumers will continue to flock to stores to fill up on staples like toilet paper, cigarettes and other necessities, whether we are in the midst of market turmoil or economic prosperity.
ETF investors looking for a strong defensive play on some of the largest companies that profit from our predictable buying habits should look no further than the various consumer staples ETFs available.
Today, investors can choose from a number of large, liquid offerings from some of the largest providers of exchange traded funds. Funds such as the Consumer Staples Select Sector SPDR Fund (XLP) and the Vanguard Consumer Staples ETF (VDC) provide investors with ample exposure to the companies that produce the products we can't live without.
My pick for playing this industry right now is the iShares Dow Jones U.S. Consumer Goods Index Fund (IYK).IYK is neither the cheapest nor the most liquid of the consumer staples ETFs available. However, I believe that the fund's underlying holdings provide investors with the best play on this defensive industry with an added twist that primes it for great upside. Additionally, with a 2.4% yield, IYK provides investors with a nice flow of income no matter which way the fund and market moves. Most of IYK's portfolio, like other consumer staples ETFs, is dominated by its top holdings which include stable giants such as Procter & Gamble (PG - Get Report), Phillip Morris International (PM - Get Report), Coca-Cola (KO - Get Report), Pepsico (PEP - Get Report) and Altria (MO). Together, the fund's top holdings account for more than 60% of the fund's total portfolio. Other notable firms like HJ Heinz (HNZ), Mattel (MAT) and Energizer (ENR) can also be found among IYK's underlying index.
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