IYK: Packed With High-Quality Defensive Plays But Comes With Rich Valuation

Vasily Zyryanov profile picture
Vasily Zyryanov


  • IYK has a top-heavy concentrated portfolio of 54 U.S. consumer staples stocks.
  • Its past returns (before end-September 2021) were heavily impacted by growth stocks that the fund no longer holds.
  • Its exceptional quality is what appeals to me, but its valuation is a serious concern.
  • IYK has an expense ratio over 4x larger than VDC's and XLP's, which makes it a far less appealing long-term holding.
  • This time, IYK earns only a Hold rating.

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The shifting tides of market sentiment this year raise the question of whether playing defense makes sense. As tech is reeling on the ropes while the broad market is deeply in the red with the stagflation risk

Data by YCharts

Quant data table with ETF holdings

IYK top-twenty stocks as of May 13. Quant data as of May 19

Scatter plot

Created by the author using data from Seeking Alpha and the fund

Data by YCharts

This article was written by

Vasily Zyryanov profile picture
Vasily Zyryanov is an individual investor and writer.He uses various techniques to find both relatively underpriced equities with strong upside potential and relatively overappreciated companies that have inflated valuation for a reason.In his research, he pays much attention to the energy sector (oil & gas supermajors, mid-cap, and small-cap exploration & production companies, the oilfield services firms), while he also covers a plethora of other industries from mining and chemicals to luxury bellwethers.He firmly believes that apart from simple profit and sales analysis, a meticulous investor must assess Free Cash Flow and Return on Capital to gain deeper insights and avoid sophomoric conclusions.While he favors underappreciated and misunderstood equities, he also acknowledges that some growth stocks do deserve their premium valuation, and its an investor's primary goal to delve deeper and uncover if the market's current opinion is correct or not.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

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