“Procter & Gamble(PG) fell 3.5% early today, dragging Consumer Staples Select Sector SPDR(XLP) down 1.16% with it. P&G’s slide comes in the wake of a fiscal fourth-quarter earnings drop of 18% from the previous year. Revenue in the fourth quarter fell 2.23% from the year before,” Don Dion Reports From The Street.
“This moment is a teachable one for ETF investors who flock to funds like XLP to avoid security-specific risk. P&G accounts for more than 16% of XLP’s assets, an allocation that will surely sway the ETF. Capitalization-weighted strategies, favored by issuers like State Street(STT) and iShares, can often overweight top components when executing their strategies. XLP’s portfolio has 42 holdings, but 66% of the fund’s assets are concentrated in the fund’s top 10 components. While investors are more diversified buying XLP than picking just a couple of consumer names, they will still be particularly vulnerable to the movements of a few key components,” Dion Reports.
“The other risk inherent in buying a cap-weighted strategy like XLP is unintended overexposure on a broader scale. The top five components of XLP — P&G, Wal-Mart(WMT), Philip Morris(PM), Coca-Cola(KO) and CVS(CVS) — are large companies that an investor might own individually or in other parts of their broader portfolio strategy. Alternatives to the cap-heavy strategy offered by XLP include PowerShares Dynamic Consumer Staples ETF(PSL) and Rydex S&P Equal Weight Consumer Staples ETF(RHS) have not gained much traction,” Dion Reports.
Here is a list of the top companies listed within the XLP ETF below:
|TOP 10 HOLDINGS ( 67.02% OF TOTAL ASSETS)|
Full Story: HERE