Amid a volatile market environment in 2012, investors have embraced a favorite hideout at the sector level: Consumer Staples. Year to date, the Consumer Staples sector, which represented about 11.2 percent of the S&P 500 Index was up 10.3 percent (price only), trailing the 12.8 percent rise for the S&P 500, according to a research note published by S&P Capital IQ.
Still, S&P Capital IQ remains bullish on the staples sectors and reiterated Overweight ratings on three ETFs tracking staples stocks. Those funds are the Consumer Staples Select Sector SPDR (XLP), the iShares Dow Jones US Consumer Goods Index Fund (IYK) and the Vanguard Consumer Staples ETF (VDC). With $5.86 billion in assets under management and an expense ratio of 0.18 percent, XLP is the largest and least expensive staples ETF.
S&P said it rates another four staples ETFs with at least $100 million in AUM as Market-weight.
"Within the Risk Considerations category, each of the three ETFs received a relatively favorable appraisal from the S&P Quality Rank metric, which suggests a relatively good earnings and dividend track record for companies of which these ETFs owned shares," S&P said in the note.
Year-to-date, VDC is the performance leader of the trio with a 10 percent gain. XLP is next with a gain of 8.65 percent while IYK is up 7.45 percent.
Within all three ETFs, the top-10 holdings account for dominant positions. VDC's top-10 lineup represents nearly 66 percent of the fund's while IYK's top-10 constituents account for almost 59 percent of the ETF's overall weight. XLP's top-10 is equivalent to approximately 70 percent of that ETF's weight.
Procter & Gamble (PG), Coca-Cola (KO) and Philip Morris (PM), in that order, are the top-three holdings in each fund. All three ETFs also feature Wal-Mart (WMT), PepsiCo (PEP), Kraft (KFT) and Altria (MO) among the top-10 holdings.
"Among other risk-related analytics, all of these ETFs also had a favorable appraisal related to standard deviation, which measures price volatility of the ETF," S&P said in the note. "Also, XLP had a relatively favorable S&P credit rating appraisal (related to holdings; based on publicly available credit rating information from a separate S&P unit), compared to a more mid-range relative assessment for the other two ETFs. However, the holdings-related S&P Risk Assessment from S&P Capital IQ equity analysts was relatively unfavorable for all three of the ETFs."
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