Quick, what do these three exchange-traded funds–Consumer Staples Select Sector SPDR, iShares Dow Jones U.S. Energy Sector, and Vanguard Consumer Staples–have in common?
They are the only three equity ETFs that met the toughest possible screening parameters. All three have a five-year track record and also have positive total returns for the last five years, according to a screen of Standard & Poor’s Equity Research’s universe of ranked ETFs conducted on the last trading day of May 2009. All three have an expense ratio of less than 0.5%. Moreover, all three win an “overweight” recommendation from S&P’s new qualitative and quantitative ETF assessment tool.
A quick word about S&P’s methodology: instead of relying only on past performance and risk/return characteristics to generate a ranking, S&P also considers the outlook for the underlying holdings (stocks) within the ETF. Of course, S&P also weighs performance, costs, and risks. These three ETFs garner an “overweight” recommendation in all three, contributing to the overall “overweight” ranking.
Two of the three–the Consumer Staples Select Sector SPDR and the Vanguard Consumer Staples–are similar in that they both track the performance of the consumer staples sector of the economy. Consumer staples stocks make up 12.3% of the S&P 500 index.
A Good Sector