Global Staples ETF: More Bang For Your Buck

Cut rates, but don't cause bubbles. Stimulate the economy, but don't bring on "inflated" prices. Say the right thing, whatever that "right thing" may be. Indeed, the U.S. Federal Reserve has been assigned the daunting task of simultaneously assuaging the fears of borrowers, employees, CEOs and investors. And yet, there is a sector of every modern economy that tends to perform no matter what the Fed says or does.

Staples. (No, not the office supply chain.) In developed countries worldwide, we simply do not stop purchasing toothpaste, paper products, noodles, soda, alcohol or cigarettes.

Consumer staples tends to be the least desirable stock segment in a raging bull. Yet, when you're playing defense, it's hard to argue against the likes of Pepsi (PEP), Phillip Morris (MO) or Kraft (KFT). (Mac-n-cheese is always in demand.)

But what if you wish to be defensive, and get a slightly higher bang for your consumer staple buck? You think globally.

The iShares S&P Global Consumer Staples (KXI) is up 18% over 1 year, 9% YTD. It's also flirting with new highs. And its downside risk in rapid selloffs has not been as dramatic as other segments of the U.S. or international economies.

Granted, there's a large exposure to U.S. companies. And those who wish to avoid "sin stocks" would have a tough time signing on this dotted line. (Altria/Phillip Morris, British American Tobacco (BTI), Reynolds (RAI) and Anheuser Busch (BUD) are all on board.)

Nevertheless, if making money in good and bad times is your goal, you've got a global approach with KXI. For every "Bud Light," there's a "Smirnoff Twist" produced by Diageo (DEO). For every "zestfully clean" soap bar produced by Procter & Gamble (PG), there's a Dove soap cleanser made by Unilever (UL).

Need more proof? Find out how the KXI has fared against the iShares S&P Europe 350 Index (IEV) in this post from before the "crisis".

Comments

[granger]

Great article.

How do you think this stacks up with DPN from Wisdomtree. I like the DPN's focus on dividends with the addition of healthcare to boot. Maybe a combination of the two would work best. Any thoughts?