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Max Manturov

Max Manturov

Head of investment research regulated by CySec 25.05.2021

Consumer Goods ETF: A New Safe Haven Idea

The inflation in the US is gaining momentum, e latest data posting a 4.20% YoY figure, with a target of just 2%. The Fed is not going to cut its quantitative easing (QE) program any time soon, which means this trend might well continue. When this is the case, consumer goods companies may act as safe havens, as the production costs are finally paid by the consumers, while the rising prices do not affect the demand that much, and the earnings stay high. In particular, there are two ETFs with good potential one may invest into: XLP.US and VDC.US.

1. Consumer Staples Select Sector SPDR Fund

Current Price: $71.20

Ticker: XLP.US

This ETF contains essential goods company stocks, which makes it suitable for those who want to protect themselves from inflation. This fund has a conservative strategy, which means it should work well during the market decline. XLP offers impressive liquidity and high extent of diversification, making it one of the best consumer goods ETFs out there.

The fund tracks the Consumer Staples Select Sector Index.

Key Facts:

Assets under management: $10.85B

Dividend yield: 2.49%

Expense Ratio: 0.12%

Number of stocks in ETF: 33

Companies with the largest share:

  • Procter & Gamble Company: 15.90%
  • Coca-Cola Company: 9.90%
  • PepsiCo, Inc.: 9.45%
  • Walmart, Inc.: 8.97%
  • Costco Wholesale Corporation: 4.82%    

Countries with the largest share: US, 99.90%

Sectors with the largest share: Consumer non-durables, 78.30%

Average P/E ratio: 21.30х

YTD yield: 5.69%

2. Vanguard Consumer Staples ETF

Current Price: $185.20

Ticker: VDC.US

This ETF mostly targets buy & hold investors, as it consists of consumer goods stocks; however, this is also a good option for those aiming for a low risk portfolio. Vanguard has a unique structure that allows it to have 97 different stocks and avoid too much focus on large cap companies. With its being focused on consumer goods and having this structure, VDC.US is a great safe haven in times of fast rising inflation.

This ETF tracks the MSCI US Investable Market Consumer Staples 25/50 Index.

Key Facts:

Assets under management: $5.74B

Dividend yield: 2.55%

Expense Ratio: 0.10%

Number of stocks in ETF: 97

Companies with the largest share:

  • Procter & Gamble Company: 14.10%
  • Coca-Cola Company: 8.80%
  • PepsiCo, Inc.: 7.90%
  • Walmart, Inc.: 7.90%
  • Costco Wholesale Corporation: 5.60%

Countries with the largest share: US, 99.60%

Sectors with the largest share: Consumer non-durables, 74.10%

Average P/E ratio: 25.60х

YTD yield: 7.17%

How to Buy ETFs?

If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.

After opening an account, you can buy ETFs in either of the following ways:

Freedom24 Web Platform: In the Web Terminal section, type XLP.US (Consumer Staples Select Sector SPDR Fund ticker) and VDC.US (Vanguard Consumer Staples ETF ticker) in the search box, and select the appropriate ETF in the results. Open a secure session in the trading window on the right, select the number of securities you want to buy, and click Buy.

Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type XLP.US (Consumer Staples Select Sector SPDR Fund ticker) and VDC.US (Vanguard Consumer Staples ETF ticker), and select the appropriate ETF in the results. You will then see the ETF in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of securities you want to buy and click Buy.

Go to Freedom24 web platform >>

*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Cyprus Ltd or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.

  • Sources of information

  • Recommendation evaluation methodology according to Market Research Terms of Use
    Freedom Finance analysts perform a three-stage analysis. They select a promising industry based on the latest news, statistics and industry-specific metrics. They assess the supply and demand situation and its future development dynamics. Industry’s investment attractiveness is mostly affected by the forecasted market growth rates; total addressable market, player concentration level and likeliness of a monopoly formation, as well as the level of regulation by various entities or associations.

    The assessment is followed by the comparative analysis based on the selected sample. The sample comprises companies with a market capitalization of over USD 1 billion, but there is space for exceptions (when the suitable level of liquidity for company’s securities is available on the stock exchange). The selected companies (peers) are being compared against each other based on multipliers (EV/S, EV/EBITDA, PE, P/FCF, P/B), revenue growth rates, marginality and profitability (operating income margin, net income margin, ROE, ROA), and business performance.

    Having completed the comparative analysis, the analysts carry out a more in-depth research of the news about the selected company. They review company’s development policy, information about its current and potential mergers and acquisitions (M&A activity), and assess the efficiency of company's inorganic growth and other news about it over the past year. The main objective at this stage is to identify the growth drivers and evaluate their stability, as well as the extent of impact they have on the business.

    Based on all the data collected, the analysts determine the weighted forecasted figures of company’s growth rates and proposed business marginality, which are used to calculate the company’s multiplier-based estimated value. The said value enables setting the stock price target and stock value growth potential.

    The expected timing of the idea implementation is set depending on the current market situation, volatility level and available forecasting horizon for industry and company development. The forecasting period is normally set between 3 and 12 months.