Consumer Staples ETF (RHS) Hits New 52-Week High

Globally, these days, demand for consumer staples are building up.

Appreciate all thoughts.

http://finance.yahoo.com/news/consum...133701650.html

I like Consumer Staples stocks. They represent 38% of my portfolio, by far the largest allocation.

I wasn't aware of the RHS ETF, so I was interested to note how well this ETF performed compared to the more well known XLP State Street Consumer Staples Select ETF.
It looks like it's all down to the "equal weighting" feature of RHS. XLP is a weighted index, with Procter and Gamble (PG) and Coca Cola (KO) comprising 20% of the fund. Both companies have underperformed the S&P 500 index over the last 2 years, so that would explain XLP underperformance compared to RHS.

I've really enjoyed the great performance of the Consumer Staples sector over the last 6 years. It's not a traditional sector you would expect great capital gains. You usually build a holding of consumer staples stocks to form the core of a long-term portfolio and to provide stability and yield. Capital gains are usually steady, but not spectacular. I've considered the excellent performance of this sector over the last 6 years because of income investors/yield chasers. These investors can't get decent yields from savings accounts and government bonds, so I believe many have invested in blue-chip consumer staples following Buffet's concept of "Equity Bonds".

As government bond yields rise back to historically normal levels, I suspect the capital gains we've experienced in the consumer staple sectors to level off. In order to see a continuation of capital gains in this sector, revenue growth from these companies with distribution channels in emerging markets would have to more than offset the effect of rising bond yields. We would need to see a very buoyant global economy in such circumstances. We certainly don't expect much industry growth from the "Western economies" because when economic times are great, we don't brush our teeth 3 times more often, we don't use soap twice as much and we don't consume more cereal than we already do. So industry growth can only take place in sales to emerging economies. I think in future years, capital gains from consumer staples is more likely a play on the rising global living standards.

I'm no macro-economics expert, and it's not an area I spend much time thinking about. I do know my individual holdings in this sector and like the companies I own over the long term.

Thanks Marketwinner for making me aware of RHS. I may just divert some of my future investment funds into this ETF. When I first started investing in the markets (no internet, had to ring up and speak to a real person/broker in San Francisco, from New Zealand), ETFs weren't readily available. You either invested directly in company stocks, or you purchased unlisted managed funds and accepted the exorbitant fees that went with it. I held some of my US consumer staple stocks for almost 3 decades now. I don't own any ETFs in the US market, but I really should in order to eliminate individual company risk.

Thank you boring. I really appreciate for your reply.

I believe that consumer staples companies more exposure to emerging and frontier world will have more growth over others. We cannot ignore population growth in emerging world especially in Asia.

Demand for convenient and branded packaged food and hot beverages is growing in the developing countries, as middle-class consumers shift to urban living. Therefore, the rising pool of middle class consumers in emerging and frontier markets represents a huge opportunity for branded consumer companies. I believe Asian food companies should do well in the coming decades.

Following are some of the popular consumer staple companies listed in global markets. In addition there are plenty of under researched, neglected hidden consumer staples in frontier and emerging world. Companies such as NESTLE have listed in frontier markets as well. Long term Investors have rewarded handsomely in those countries.

Yum Brands, Kraft, Starbuck, Tata Tea, Nestle, Green Mountain Coffee Roasters, Tyson Foods (TSN), Kellogg's (K) and Sanderson Farms,

Most of the great bull markets in recent years were propelled by fast-growing technology companies or capital goods makers and the always important financial sector, namely banks and investment companies.

But the leaders this time around are rather conservative sectors such as Consumer staple companies, health care companies and utilities.

As you said we can eliminate individual risk by picking ETF. Still I prefer under researched, neglected hidden individual companies in all types of markets such as developed, emerging and frontier markets over ETF mainly due to higher return. Some ETFs can underperform due to poor performance of few companies. I like your long term approach to some consumer staples. We could reward handsomely by picking real winners. Some consumer staples companies will outperform others in the long run as well.

Sounds like you are as passionate about the global consumer staples sectors as I am. I love this sector because for direct investors, it's the most easily understood sector. In most cases, you buy and consume these products everyday. It's a pure implementation of the "Peter Lynch" strategy of finding investment opportunities from products you know and love.

Being a fairly conservative investor in this sector, I employ 3 strategies:

1. Invest in a consumer staple company that is a well established leader in Western economies, but is agressively expanding into emerging and fronter markets.
2. Invest in a company that is already operating in, or transforming itself towards favourable sub-sectors such as organic, simpler, less processed and/or fresh foods.
3. Invest in a massive global behemoth that has so much "financial clout", that it can buy it's growth through acquisition.

This way, you get the added benefit of mature, established revenue flows from home markets and future revenue growth through exposure to growing economies and new sub-sectors.

Here's an example of each strategy from my way of thinking:

1. Kraft Heinz (KHC)
As identified by Marketwinner, this company is the market leader in it's home markets but is actively expanding into emerging markets by distributing it's own product lines and acquiring existing local emerging market companies. Who isn't aware of Heinz ketchup, Wattie's Tomato Sauce (for you Kiwis) and Kraft Vegemite. The Heinz operation derives more than 20% of its revenues from emerging markets thanks to acquired brands such as Quero (Brazil) and Foodstar (China).

2. General Mills (GIS) and Hain Celestial (HAIN)
This cereal and packaged foods company is reinventing itself from just sugary cereals and baking products towards a more socially-conscious and organic packaged food provider. Artifical ingredients are to be phased out and they have just acquired Annies natural and organic foods. Hain Celestial is one of the largest natural and organic packaged foods companies and expands its portfolio by serially acquiring smaller organic food companies. With it's stock price being hit lately, it looks worhtwhile to be included in everyone's watchlist(I don't own shares in this company).

3. Coca Cola (KO) - the US Enterprise, not to be confused with the Australian company Coca-Cola Amatil (CCL)
This is archetypal global behemoth, massive scale, iconic, yet very misunderstood by the main street investor. This company is more than a manufactuer of sugary sodas. It's a global beverage distribution company that owns, operates and distributes more than 500 product lines in sodas, water, juices, iced tea and energy drinks. The stock price can suffer from "headline" risk when media trumpet falling sales volumes in sugary carbonated drinks due to obesity concerns. Along with Mcdonalds, this company is the obesity poster child that polarises everyone. This makes it the perfect time to pick up additional shares on price weakness. Coca Cola is not going broke anytime soon because as soda volumes fall, volumes of iced tea, water and vitamin water usually increase. Not only that, Coca Cola get paid by companies like Dr Pepper Snapple Group (DPS) to distribute it's products to supermarket shelves in many jurisdictions. One of it's least appreciated assets is it's established global logistic supply chain and arrangements with leading supermarkets for shelf space. It's vast financial clout means that it can buy it's future growth through acquisition. We've seen Coca Cola take an equity stake in Monster beverages and Green Mountain Coffee Roasters (which is can exit at a small profit when Green Mountain delists). This is a truly great consumer staple company. I'm biased because I have owned shares in this company for several decades now and like to pick up more whenever the obesity finger of blame is pointed in Coca Cola's direction.

Other consumer staple companies I like for the long-term include:

WhiteWave Foods (WWAV)
McCormick (MKC) - I already own shares in this company, you can't go wrong with the global leader in spices. Try cooking without them !
Colgate Palmolive (CL) - toothpaste and soap. Check out how the supermarket shelf space for toothpaste is dominated by Colgate's many product lines.

One company I really like, but unfortunately it's privately owned is MARS. I'd love to own shares in this company because of it's diverse portfolio of brands. Think M&Ms, Snickers, Masterfoods, Uncle Bens, Eukanuba and Iams pet food, Wrigley gum etc. This is a great product brand company that I've admired for decades but I have no chance of getting in on the action !

Feel free to post other investment oppoortunities in this space.

"It's a pure implementation of the "Peter Lynch" strategy of finding investment opportunities from products you know and love.”

I completely agree with above. This method will give us safety and higher returns.

Thank you for your great information. It is good to see General Mills is adding new products to their production line. I have followed General Mills heavily in the past.

It is time to keep some attractive ones under our radar.

This is the best time to do some home work on consumer staples to identify some long term investment. Investors can take advantage from fire sales. Even there were some selloffs in consumer staples on Friday.

http://www.nasdaq.com/article/3-cons...arket-cm566234

3 Consumer Staples Stocks to Buy to Beat the MarketACc

Institutions have to go somewhere during period of volatility. Consumer staples are one of such places. They go defensive: that’s where consumer staples strength comes into play. We could see some great opportunity in 2016/17 especially for tasty food related stocks in global stock markets.

Consumer related stocks will do well even in Asian frontier markets due to falling commodity inflation and positive consumer spending.

According to the following link, the Consumer Staples Select Sector SPDR ETF (XLP) invests 3.4% of its holdings in Colgate-Palmolive.

http://finance.yahoo.com/news/impact...120721873.html

Impact of Venezuela Operations on Colgate-Palmolive’s 4Q15

http://www.benzinga.com/trading-idea...bulent-markets

Staples ETFs Offering Protection In Turbulent Markets

Cereal, soup, meat, spices and fast food stocks etc are in full swing. Mainly, value stocks in this sector should outperform others.

http://www.cnbc.com/2016/04/26/a-cla...you-think.html

Warren Buffett has a Coke, and a smile, for good reason

http://www.benzinga.com/trading-idea...h-staples-etfs

The Time Is Right To Stick With Staples ETFs

http://www.nasdaq.com/article/consum...-high-cm620520

Consumer Staples ETF (RHS) Hits New 52 Week High

http://finance.yahoo.com/news/bulls-...141418964.html

Bulls turning to consumer staples

http://www.schwab.com/public/schwab/nn/articles/Consumer-staples-sector

Consumer Staples Sector Rating: Marketperform

https://www.benzinga.com/analyst-ratings/analyst-color/17/08/9927379/zacks-analyst-take-a-look-at-food-stocks

Zacks Analyst: Take A Look At Food Stocks