XLP: Here's A Better Approach

DM Martins Research
20.91K Followers

Summary

  • The Consumer Staples Select Sector SPDR ETF is a basket of 33 stocks with a lower risk profile.
  • An equity portfolio that does not have enough defensive stocks in it would likely benefit from a few shares of XLP.
  • However, I believe there is a better way to assemble a defensive portfolio that would likely continue to outperform XLP as it has since 1999.
  • Spoiler alert: look outside the consumer staples space and focus on low beta.

Woman choosing domestic cleaning product by the supermarket shelf

zoranm

I am a huge proponent of diversification, especially in investments that do not behave exactly like the broad stock market indices — be it within equities or across different asset classes. For this reason alone, I think the Consumer Staples Select Sector SPDR

This article was written by

20.91K Followers
Daniel Martins is the founder of independent research firm DM Martins Research. The firm's work is centered around building more efficient, easily replicable portfolios that are properly risk-balanced for growth with less downside risk. His work has been featured on Seeking Alpha and other platforms through 2,000+ articles, and it has been cited by the New York Times, CNN, Reuters, USA Today, and others.- - -Daniel is the founder and portfolio manager at DM Martins Capital Management LLC, a macro strategy hedge fund (leveraged risk-parity approach that uses return stacking to achieve aggressive long-term capital appreciation). He is a former equity research professional at FBR Capital Markets and Telsey Advisory in New York City and finance analyst at macro hedge fund Bridgewater Associates, where he developed most of his investment management skills earlier in his career. Daniel is also an equity research and global equities market instructor for Wall Street Prep, where he has developed content and trained hundreds of senior and junior analysts at some of the largest bulge bracket investment banks and sovereign investment funds in the world.He holds an MBA in Financial Instruments and Markets from New York University's Stern School of Business.- - -On Seeking Alpha, DM Martins Research has partnered with EPB Macro Research and collaborated with Risk Research, Inc.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SPY either through stock ownership, options, or other derivatives. 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.

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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