There's nothing wrong with flying first class, but coach fares have looked more appealing lately. The ongoing old battle between utility and extravagance becomes clearer during tough economic times. Consumers have begun to cut back on big ticket items like new cars and high priced vacations outside the U.S. As the shift toward utility purchasing grows, investors should consider how a basket of consumer goods could balance their portfolios.
Everyday Goods
The Consumer Staples SPDR ETF (AMEX:XLP) covers a wide range of companies that produce everyday goods like medicines, colas, household items and personal products. Most investors probably have used at least one product or service offered by one of XLP's 38 consumer goods holdings. Procter & Gamble (NYSE:PG), Wal-Mart (NYSE:WMT) and Phillip Morris International (NYSE:PM) dominate more than one-third of the fund's portfolio. Therefore, it's time to take a look at a few of the companies that make up the XLP. (For more reading on ETFs, check out Five Ways to Find a Winning ETF.)
Goods For All Occasions
Whether it's the stuffy head fever reliever, NyQuil, the specially formulated baby clothing detergent, Dreft, or the snack attack satisfier, Pringles, Procter & Gamble is there to meet many consumer needs. However, the company is down under 20% since the beginning of the year, while the SPDR S&P 500 Index ETF (AMEX:SPY) is down more than 30% through October 21.
Discount Leader
One-stop shop Wal-Mart is visited weekly by more than 100 million customers worldwide. Well-placed stores, fully-stocked shelves and low prices form a triple threat against competitors who wish to beat out the retail giant in the competition for consumers, who lately have focused spending more on food and household necessities, than extravagances. Lower gas prices averaging $2.85 for a gallon of regular gas (according to the Automobile Association of America (AAA)) may help the retailer turn in a profitable holiday season, despite forecasts of slowing retail sales by the National Retail Federation. Wal-Mart stock has appreciated right around 10% since the beginning of the year.
Not Altria Anymore
Philip Morris International split away from its parent company Altria (NYSE:MO) in March of 2008. Philip Morris targets its tobacco products in the European Union, the Middle East, Africa, Asia and Latin America. Philip Morris International stock has fallen more than 15% since March 17. (For more on socially responsible investing, check out A Prelude to Sinful Investing.)
Final Thoughts
XLP is down -14.30% since the beginning of the year. Its focus on consumer goods has not kept it out of negative territory, but XLP has outperformed the broader market as consumers refocus their spending habits.
