Consumer Staples Sector 2Q17: Best and Worst

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The Consumer Staples sector ranks first out of the ten sectors as detailed in our 2Q17 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Consumer Staples sector ranked first as well. It gets our Attractive rating, which is based on an aggregation of ratings of nine ETFs and eight mutual funds in the Consumer Staples sector as of April 5, 2017. See a recap of our 1Q17 Sector Ratings here.

Figure 1 ranks from best to worst all nine Consumer Staples ETFs and Figure 2 ranks from best to worst the seven Consumer Staples mutual funds that meet our liquidity standards. 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.

Our robo-analyst technology empowers our unique 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

* 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

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

Sources: New Constructs, LLC and company filings

Fidelity Select 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.

Fidelity MSCI Consumer Staples Index ETF (FSTA) is the top-rated Consumer Staples ETF and Fidelity Select Construction and Housing Portfolio (FSHOX) is the top-rated Consumer Staples mutual fund. Both earn a Very Attractive rating.

PowerShares DWA Consumer Staples Momentum Portfolio (PSL) is the worst rated Consumer Staples ETF and Fidelity Advisor Consumer Staples Fund (FDAGX) is the worst rated Consumer Staples mutual fund. PSL earns a Neutral rating and FDAGX earns a Dangerous rating.

120 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 HOLDINGs = PERFORMANCE OF FUND

Analyzing each holding within funds is no small task. Our robo-analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

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

Sources: New Constructs, LLC and company filings

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

Sources: New Constructs, LLC and company filings

This article originally published on April 5, 2017.

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

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