ETF Research and Analysis

by Robert Goldsborough
Suitability
First Trust Consumer Staples AlphaDEX FXG should be treated as a complementary satellite holding to a diversified portfolio. This exchange-traded fund, which holds firms whose products consumers buy regardless of economic   Read more 

Bull Case

Companies held in this fund generally have stable revenue growth and cash flows.
We expect that one use for consumer staples firms' excess cash will be for smaller, bolt-on deals, which we view positively as they would offer the acquisitors the opportunity to get a better handle on the local consumer without having to incur significant financial leverage.
This ETF offers much more of a mid-cap tilt than do other consumer staples ETFs. As such, we believe it provides purer exposure to the U.S. consumer staples sector than do some of its peers, whose holdings include large mass retailers and conglomerates with meaningful overseas businesses. Read more 

Bear Case

The defensive nature of the businesses included in this ETF may mitigate the downside in a severe economic downturn, but that doesn't mean investors won't experience periods of negative returns.
Higher commodity input costs could hurt some of the more commoditylike firms in this ETF, such as Dean Foods.
The retailers held in this ETF operate in very competitive environments that can make margin expansion difficult. Read more 

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