The Consumer Staples sector ranks first out of the 11 sectors as detailed in our 4Q17 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Consumer Staples sector ranked first as well. It gets our Very Attractive rating, which is based on an aggregation of ratings of nine ETFs and 11 mutual funds in the Consumer Staples sector as of October 5, 2017. See a recap of our 3Q17 Sector Ratings here.
Figure 1 ranks from best to worst all nine Consumer Staples ETFs and Figure 2 ranks from best to worst the nine 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 18 to 114). 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[1]. 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
*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
* 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) and ICON Consumer Staples Fund (ICLEX) are excluded from Figure 2 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.
Fidelity MSCI Consumer Staples Index (FSTA) 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 S&P Small Cap Consumer Staples Portfolio (PSCC) is the worst rated Consumer Staples ETF and ICON Consumer Staples Fund (ICRAX) is the worst rated Consumer Staples mutual fund. PSCC earns a Neutral rating and ICRAX earns an Unattractive rating.
119 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. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. 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 October 6, 2017.
Disclosure: David Trainer, Kyle Guske II, and Kenneth James receive no compensation to write about any specific stock, sector or theme.
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[1] Ernst & Young’s recent white paper “Getting ROIC Right” proves the superiority of our holdings research and analytics.