Consumer Staples Sector 1Q17: Best and Worst

The Consumer Staples sector ranks first out of the ten sectors as detailed in our 1Q17 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Consumer Staples sector ranked first. It gets our Very Attractive rating, which is based on aggregation of ratings of nine ETFs and 12 mutual funds in the Consumer Staples sector as of January 17, 2017. See a recap of our 4Q16 Sector Ratings here.

Figure 1 ranks from best to worst all nine Consumer Staples ETFs and Figure 2 shows the five best and worst rated Consumer Staples mutual funds. Not all Consumer Staples sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 16 to 117). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Consumer Staples sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Here is our ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings. We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best & Worst Ratings – Top 5

consumerstaples1q17_figure1* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

consumerstaples1q17_figure2* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Fidelity Automotive Portfolio (FSAVX) is excluded from Figure 2 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

iShares U.S. Consumer Goods ETF (IYK) is the top-rated Consumer Staples ETF and Vanguard Consumer Staples Index Fund (VCSAX) is the top-rated Consumer Staples mutual fund. Both earn a Very Attractive rating.

PowerShares Dynamic Food & Beverage Portfolio (PBJ) is the worst rated Consumer Staples ETF and Fidelity Consumer Staples Fund (FDAGX) is the worst rated Consumer Staples mutual fund. Both earn a Neutral rating.

118 stocks of the 3000+ we cover are classified as Consumer Staples stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.

PERFORMANCE OF FUND’s HOLDINGs = PERFORMANCE OF FUND

Figures 3 and 4 show the rating landscape of all Consumer Staples ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

consumerstaples1q17_figure3

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds

consumerstaples1q17_figure4

Sources: New Constructs, LLC and company filings

This article originally published here on 1/18/17.

Disclosure: David Trainer, Kyle Guske and Kyle Martone receive no compensation to write about any specific stock, sector or theme.

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