Up For Sequel In 2012?

Published on Monday, 30 January 2012 22:16 Written by Todd Shriber

New York, January 30^th (TradersHuddle.com) – Following on the heels of our look at the Materials Select Sector SPDR (NYSE: XLB), a high-beta sector ETF if ever there was one, we’re heading in the opposite direction to take a look at one of the most boring sectors on the market consumer staples and that means it’s time to evaluate the Consumer Staples Select Sector SPDR (NYSE: XLP).

Yes, staples stocks can be boring, but boring can be beautiful. That was the case in 2011 when XLP battled the equally boring Utilities Select Sector SPDR (NYSE: XLU) for top honors among the best-performing sector funds of the year. A new day has dawned in 2012, as both XLU and XLP are negative for the year, though that’s not necessarily an indictment of XLP.

Sure, the argument has been made countless times in recent years that buy-and-hold investing is dead and it probably is, but staples are one of just a few sectors where buy-and-hold investors can still find some comfort. Staples stocks like Dow components Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO) and Wal-Mart (NYSE: WMT) are predictable and they raise their dividends like clockwork every year. In fact, Procter & Gamble is up to 54 consecutive years of higher dividends.

That trio of stocks accounts for almost 30% of XLP’s weight. The rest of XLP’s top-10 holdings with the exception of Costco (NASDAQ: COST) reads like a who’s who of dependable dividend payers. PepsiCo (NYSE: PEP), Colgate-Palmolive (NYSE: CL), Altria (NYSE: MO) and Kraft (NYSE: KFT) are also found among the ETF’s top-10 constituents. Put another way, if you can’t decide between Coke and Pepsi, Procter & Gamble and Colgate-Palmolive and Kraft and General Mills (NYSE: GIS), you don’t have to with XLP. All of those stocks and more call the ETF home.

Or maybe you’re among the legions of investors that swear by the Warren Buffett value investing philosophy. There’s nothing wrong with that. The returns Buffett has generated over the years for Berkshire Hathaway (NYSE: BRK-A) investors are legendary. Guess what? If ever there was an ETF that Buffett himself might own, it would be XLP.

Look at XLP’s top-10 holdings. Do they look familiar? They would to Buffett because Berkshire owns majors chunks of Coke, Kraft, Procter & Gamble and Wal-Mart. That’s not bad endorsement at all.

The vitals: With an expense ratio of 0.2% and assets under management of almost $4.9 billion, XLP is one of the cheapest and the largest consumer staples ETF. Having debuted in 1998, it’s also one of the oldest. Rival funds include the iShares Dow Jones US Consumer Services ETF (NYSE: IYC) and the Vanguard Consumer Staples ETF (NYSE: VDC).