Consumer ETFs Slip On The Coca-Cola Company Earnings [Vanguard Consumer Staples ETF]

VDC in Focus

This fund manages a $1.61 billion asset base and provides exposure to a basket of 110 consumer stocks by tracking the MSCI US Investable Market Consumer Staples 25/50 Index. The product charges a low fee of 14 bps per year from investors. Again here, Coca-Cola is the second firm with 8.6% allocation. The product is widely spread across various sectors out of which soft drinks take up 17.6% allocation.

VDC added 28.0% in 2013 but has shed 3.29% year to date. The fund has a Zacks ETF Rank of 3 or ‘Hold’ with a ‘Low’ risk outlook.

IYK in Focus

This ETF tracks the Dow Jones U.S. Consumer Goods Index, giving investors exposure to the broad consumer staples space. The fund holds about 119 stocks in its basket with AUM of $413.8 million, while charging a slightly higher fee of 45 bps per year from investors.

Like the other two, Coca-Cola occupies the second position in the basket with 7.78% of assets. IYK is also widely diversified across sectors with beverages making up more than 18.0%.

The fund was up about 30% in 2013 but is down 3.25% so far this year (as of February 18, 2014). The product has a Zacks ETF Rank of 3 with a ‘Medium’ risk outlook.

 Bottom Line

Investors should note that the entire space of consumer staples was beaten down to start the year with freezing weather taking most of the blame, but is expected pick up pace from the second quarter. As per the Sterne Agee analyst, higher home heating bills could curb consumer spending “well into April” (read: Consumer ETFs Slip as Wal-Mart Guides Earnings Lower).

Coming to the company, Coca Cola currently remains out of our favor as evident from its Zacks Rank #4 (Sell) for company-specific reasons. Sluggish volume trends of carbonated beverages in the wake of rising health consciousness among consumers are posing threats to most of the cola giants.

So, it would be wise to bet on Coca-Cola through a basket approach as it gives some shield against the risk of single-stock investing. So for investors interested to arrest the company’s new cost savings plan, buying in the aforementioned products on their recent dips could be a better idea than just an investment in the struggling KO for now.

This article is brought to you courtesy of Eric Dutram.

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