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XLY: Affordable And Quality Exposure To U.S. Consumer Discretionary Sector


  • XLY seeks to track the investment performance of the Consumer Discretionary Select Sector Index ("Underlying Index").
  • Offers investors access to a portfolio of large-cap U.S. consumer-discretionary stocks.
  • Most popular ETF tracking this sector with AUM of over $18.5Bn.
  • I do much more than just articles at The Lead-Lag Report: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments - Warren Buffett

The Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY) looks to provide investors precise exposure to retail companies; hotels, restaurants and leisure; textiles, apparel and luxury goods; household durables; automobiles; auto components; distributors; leisure products; and diversified consumer services sectors.

There are many excellent characteristics of this ETF. XLY offers investors impressive liquidity, cost efficiency, and depth of exposure, making it one of the best available plays for investors looking for exposure to the consumer discretionary sector.

Even though the Fund got off to a shaky start in 2020, it made a strong turnaround in the latter half of the year and delivered returns of almost 40%, much higher than S&P's 30%.

As the global economy began to feel the government-imposed lockdown shocks, the restaurant, travel, and retail industries felt the brunt of containing the pandemic's spread.

On the positive side, XLY's holdings engaged in providing online services, such as Amazon (AMZN), prospered as consumers flocked to the website to order all their necessities.

Another strong performer in the consumer discretionary segment was the home improvement sector. As more Americans took advantage of stay-at-home orders to carry out home improvement projects, XLY holdings such as Home Depot (HD) & Lowe's (LOW) benefitted tremendously.

Constituent Holdings

The largest allocation is to internet and direct marketing retail firms (26.94%) in terms of segment exposure. There is also significant exposure to the Specialty retail segment (20.27%) and the automobiles segment (18.48%).

Source: Seeking Alpha

Let's take a look at some of XLY's Top 10 holdings which together, make up 71.49% of the ETF.

The most significant exposure is to Amazon, with a 22.48% allocation. This stock has performed

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This article was written by

Michael A. Gayed, CFA profile picture
Michael A. Gayed is portfolio manager, and author of five award-winning research papers on market anomalies and investing. He has a BS with a double major in Finance & Management from NYU Stern School of Business, and is a CFA Charterholder. Michael runs the investing group The Lead-Lag Report, focused on helping investors outperform in all market conditions. It offers a tactical, data-driven approach to investing, to achieve long-term success even in the face of uncertainty. With increasing market volatility, it's essential to understand risk-on/risk-off signals, seize high-yield opportunities, and leverage award-winning research to maximize returns. Learn More.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (1)

It would be nice to have a conclusion- is this a sector to be in now?
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