ETF Research and Analysis

by Robert Goldsborough
Suitability
Consumer Staples Select Sector SPDR XLP is suitable as a complementary satellite holding to a diversified portfolio. This exchange-traded fund, which offers exposure to mega-cap household names whose products consumers   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

Some of the fund's holdings, such as tobacco stocks, have been or could be the targets of costly product liability suits.
In the current ultralow-interest-rate environment, valuations of consumer staples firms have been bid up significantly.
The retailers held in this ETF operate in very competitive environments that can make margin expansion difficult. Read more 

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