This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Consumer Staple ETF's Solid Return

NEW YORK ( TheStreet) -- As I noted last week, the consumer has become a standout performer in this uncertain market. While it is possible to target this crucial slice of the economic pie using a range of discretionary ETFs, risk adverse investors may find non-cyclical stocks more appropriate.

While ETFs like the PowerShares Dynamic Leisure & Entertainment Portfolio and SPDR S&P Retail ETF (XRT) target firms responsible for providing individuals with what they "want," ETFs like the Consumer Staples Select Sector SPDR (XLP) are backed by companies responsible for what consumers "need."

Although these companies tend not to see the same standout performances during periods of economic euphoria, investors often flock to this sector to find some welcomed relief when fear takes hold.

This week is an important one for this defensive sector as industry leaders including Procter & Gamble (PG), Kraft (KFT), and CVS Caremark (CVS) report earnings. Their performance during the most recent quarter, as well as their respective outlooks for the second half of 2011 will provide important clues on the consumer.

There are a number of ETFs investors can turn to in order to gain access to these industry leaders as well as a number of other consumer staples favorites. Investors looking to specifically target the three names listed above should turn to XLP. The largest and most liquid staples-focused ETF, this product sets aside nearly a quarter of its assets to these firms.

Though lesser known, another consumer staples ETF investors may want to keep a close eye on is the First Trust Consumer Staples AlphaDEX Fund (FXG). Unlike XLP, which utilizes a passive investment strategy to target consumer staples, First Trust's underlying benchmark is weighted using a pseudo-active methodology. Underlying companies are rated using a number of variables including three-, six-, and 12-month price appreciation; book value to price; and return on assets.

This strategy results in an index unlike any other consumer staples ETF currently on the market. For example, rather than setting aside major chunks of its assets for industry bellwethers like Procter & Gamble and Phillip Morris (PM), FXG is weighted in a laddered manner, with Green Mountain Coffee Roasters (GMCR), Archer-Daniels-Midland (ADM) and Smithfield Foods (SFD) topping its list.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,090.44 -82.24 -0.48%
S&P 500 1,988.29 -6.00 -0.30%
NASDAQ 4,523.2360 -4.4530 -0.10%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs