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Consumer Staples are considered a more conservative and defensive sector. After all, no matter the economic conditions, people still need "stuff" from soap to toothpaste. The earnings growth rate for these companies may be more limited due to intensive competition as big box retailers have forced prices lower squeezing margins. Big box retailers Wal-Mart (NYSE:WMT), Costco (NASDAQ:COST), BJ's (NYSE:BJ) and others have also been able to dictate pricing terms to suppliers putting a squeeze on them as well. This has kept consumer prices lower, which is a good thing even though in so doing, it has forced smaller operations out of business.

A defensive sector like Consumer Staples will outperform when equity markets are more bearish and underperform when bullish. They will trend in the same manner overall, but still with less beta or volatility since as indicated, even the worst of times, people will need stuff. Currently, the sector is outperforming other more dynamic growth sectors as investors seek safer sectors. This has been due to poor overall economic conditions in the U.S. and in developed markets globally.

There is a wide array of ETFs devoted to the sector providing U.S. and global exposure. Most are linked to established indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones, Wisdom Tree, PowerShares, EG Shares and so forth. Also included are some so-called "enhanced" indexes that attempt to achieve better performance through more active management of the index

New issues are coming to market consistently (especially globally), and sometimes these issues will need to become more seasoned before they may be included in our listings.

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below, remain in cash or short if suitable to your tastes.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available, these are noted.

Top 10 U.S. And Global Consumer Staples ETFs

SPDR S&P International Consumer Staples ETF (NYSEARCA:IPS)

IPS follows the S&P Developed ex-U.S. BMI Consumer Staples Sector Index, which represents non-U.S. consumer staples companies with market capitalizations of at least $100M. The fund was launched in July 2008. The expense ratio is 0.50%. AUM equal $39M and average daily trading volume is just 10K shares. As of first quarter 2013, the annual dividend yield was 1.80% and YTD 9%. The one year return was 19%.

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Guggenheim (formerly Rydex SGI) S&P Equal Weight Consumer Staples ETF (NYSEARCA:RHS)

RHS follows the S&P Equal Weight Consumer Staples Index, which as the name implies, just breaks down the same sector ETF as XLP into equal weights. The fund was launched in November 2006. The expense ratio is 0.50%. AUM equal $77M with average daily trading volume of 13K shares. The fund has struggled from a marketing perspective given company ownership changes, which left it adrift for a period. This could now change with new ownership. As of first quarter 2013, the annual dividend yield was 1.7% and YTD 20%. The one year return was 28%.

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PowerShares Dynamic Consumer Staples ETF (NYSEARCA:PSL)

PSL follows the Dynamic Consumer Staples Sector Intellidex Index, which is considered an "enhanced" index since it uses proprietary quantitative analysis to more actively deploy and manage constituents. Of some interest is the more even weightings of the holdings versus others already listed. The fund was launched in October 2006. The expense ratio is 0.60%. AUM equal $36M with average daily trading volume of 3K shares. As of first quarter 2013, the annual dividend yield was 1.70% and YTD 18%. The one year return was 23%.

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PowerShares Dynamic Food & Beverage ETF (NYSEARCA:PBJ)

PBJ follows the Dynamic Food & Beverage Intellidex Index, which is another "enhanced" index from PowerShares that is more active in using quantitative analysis to select and manage the index. The fund was launched in June 2005. The expense ratio is 0.60%. AUM equal $220M and average daily trading volume is 100K shares. As of first quarter 2013, the annual dividend yield was 1.30% and YTD 18%. The one year return was 22%.

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First Trust Consumer Staples ETF (NYSEARCA:FXG)

FXG follows the StrataQuant Consumer Staples Index, which is another "enhanced" index that employs the AlphaDEX stock selection methodology to select consumer staples stocks from the Russell 1000. The fund was launched in May 2007. The expense ratio is 0.70%. AUM equal $550M with average daily trading volume of 150K shares. As of first quarter 2013, the annual dividend yield was 1.50% and YTD 21%. The one year return was 26%.

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EG Shares DJ Emerging Market Consumer ETF (NYSEARCA:ECON)

ECON follows the Dow Jones Emerging Markets Titans Index, which is a market cap weighted index of the 30 leading emerging market companies in both consumer goods and services. The fund was launched in September 2010. The expense ratio is 0.85%. AUM equal $900M and average daily trading volume is 200K shares. As of first quarter 2013, the annual dividend yield was 0.50% and YTD 0.25%. The one year return was 8%.

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iShares S&P Global Consumer Staples ETF (NYSEARCA:KXI)

KXI follows the S&P Global Consumer Staples Index, which includes the U.S. and other nation's consumer staples issues. The fund was launched in September 2006. The expense ratio is 0.48%. AUM equal $600M and average daily trading volume is 55K shares. As of first quarter 2013, the annual dividend yield was 2.50% and YTD 14.28%. The one year return was 22%.

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iShares DJ U.S. Consumer Goods ETF (NYSEARCA:IYK)

IYK follows the Dow Jones U.S. Consumer Goods Index. The fund was launched in June 2000. The expense ratio is 0.48%. AUM equal $450M and average daily trading volume is 30K shares. As of first quarter 2013, the annual dividend yield was 1.60% and YTD 15%. The one year return was 20%.

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Vanguard Consumer Staples ETF (NYSEARCA:VDC)

VDC follows the MSCI US Investable Market Consumer Staples 25/50 Index covering the entire spectrum of food, personal products, tobacco, beverage, drug stores and mega centers. The fund was launched in January 2004. The expense ratio is 0.14%. AUM equal $1.5B and average daily trading volume is 90K shares. As of first quarter 2013, the annual dividend yield was 2.50% and YTD 17%. The one year return was 24%. VDC trades commission free at Vanguard.

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SPDR Consumer Staples Select Sector ETF (NYSEARCA:XLP)

XLP covers the Consumer Staples Select Sector Index, which includes food and staples retailing, household products, beverages, tobacco and personal products. The fund was launched in December 1998. The expense ratio is 0.18%. AUM equal $7B with average daily trading volume of 6.5M shares. As of first quarter 2013, the annual dividend yield was 2.20% and YTD 17.5%. The one year return was 23.7%.

For traders and investors wishing to hedge, leveraged and inverse issues are available closely matching XLP's performance to utilize from ProShares.

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Summary

The consumer staples sector has offered excellent returns over the past two years. Currently, fund flows toward conservative/defensive sectors remain very strong. However, these sectors have become much overbought generally. Therefore, latecomers to this sector are advised to use caution.

The ETF Digest has a position in XLP.

(Source for data is from ETF sponsors and various ETF data providers.)

Source: Top 10 U.S. And Global Consumer Staples ETFs