Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
Suitability
IShares U.S. Consumer Goods ETF IYK is suitable as a complementary satellite holding to a diversified portfolio. This exchange-traded fund, which could help provide a defensive tilt to a portfolio, holds mega-cap companies   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's largest holding, Procter & Gamble, is going through an ambitious restructuring program as it seeks to cut costs and redeploy those savings toward investments in innovation. Read more 

Bear Case

The 0.45% expense ratio is higher than those of some other consumer-focused ETFs.
Some of the fund's holdings, such as tobacco stocks, have been or could be the targets of costly product liability suits.
The index provider's methodology includes some subsectors, such as autos and personal goods, that we deem to be more discretionary in nature. As such, it makes this ETF less appropriate as a true nondiscretionary option. Read more 

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