Trend: Consumer Staples Fund ETF KXI is showing steady gains due to money moving to safe and steady sectors and the global breadth of its international weighting.
Don Dion at Seeking Alpha describes why Consumer Staples Fund (KXI) is performing so well. Excerpts below.
KXI is one of the three Cream of the Crop Resilient ETFs we identified last week (link: Resilient ETFs: Cream of the Crop).
Link: Consumer Staples Fund KXI Keeps Ahead Thanks to Global Outlook - Seeking Alpha.
The performance of iShares S&P Global Consumer Staples Sector Index Fund (KXI) sharply diverged with broad market indices in recent weeks as investors responded to gloomy economic news by shifting assets to relatively safe and steady sectors of the equity markets. KXI, which holds stocks of many of the world’s largest consumer staples firms, gained 4% for the month ending November 30, while the S&P 500 slipped nearly 2%. The broad-market bogey in November hit lows it hadn’t seen since May, even as KXI reached all-time highs.
KXI ranked number 12 on our Sector Momentum Table last week, up from 19 three weeks earlier. The fund, which was launched in September of 2006, has never been higher on the Table. If KXI is destined to achieve a position in the very upper reaches of the table—and possibly in our ETF Momentum Tracker Portfolio—the coming weeks might be a ripe time for the jump. Investors in recent years have favored sectors with the potential to deliver soaring returns, such as energy and technology, but have paid less attention to options in the stalwart, but unexciting, consumer staples sector. Thanks to that neglect, this sector may be more likely than others to feature attractively valued stocks. KXI’s momentum also might get a boost from the current holiday shopping season, which could lift many of the retail stocks in which the fund invests. Moreover, the weak U.S. dollar is a boon to companies exporting goods from the U.S., as many of KXI’s holdings do.
Since its inception, KXI has fared well against its peers. Its 23.4% one-year return ranks in the top percentile among world-stock funds, according to Morningstar. What’s more, its more than 20% 2007 return through November beats that of the S&P 500’s consumer staples sector by about seven percentage points.
KXI has outpaced domestic indices largely thanks to its global breadth. The fund recently devoted nearly half its assets to foreign stocks. That international weighting makes a big difference, especially at a time when foreign firms are benefiting disproportionately from fast growth in emerging markets’ consumer populations and the falling dollar is lifting foreign stock prices for U.S. investors.
Disclosure: We may own the ETF(s) covered above at any time.
Comments