KXI: Consumer Staples Dashboard For May

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Tom Werner/DigitalVision via Getty Images This monthly article series shows a dashboard with aggregate industry metrics in consumer staples. It is also a review of sector ETFs like Consumer Staples ...

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It is also a review of sector ETFs like Consumer Staples ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694182-kxi-consumer-staples-dashboard-for-may\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SG9999014567.USD","symbol_name":"UOB UNITED INCOME FOCUS TRUST FUND (USD) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4694182-kxi-consumer-staples-dashboard-for-may","article_id":"2436925950","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1141999394/image_1141999394.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2436925950","pubTimestamp":1715977256,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Tom Werner/DigitalVision via Getty Images This monthly article series shows a dashboard with aggregate industry metrics in consumer staples. 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It is also a review of sector ETFs like Consumer Staples Select Sector SPDR ETF (XLP) and iShares Global Consumer Staples ETF (NYSEARCA:KXI), whose largest holdings are used to calculate these metrics. Shortcut The next two paragraphs in italic describe the dashboard methodology. They are necessary for new readers to understand the metrics. If you are used to this series or if you are short of time, you can skip them and go to the charts. Base Metrics I calculate the median value of five fundamental ratios for each industry: Earnings Yield (\"EY\"), Sales Yield (\"SY\"), Free Cash Flow Yield (\"FY\"), Return on Equity (\"ROE\"), Gross Margin (\"GM\"). The reference universe includes large companies in the U.S. stock market. The five base metrics are calculated on trailing 12 months. For all of them, higher is better. EY, SY and FY are medians of the inverse of Price/Earnings, Price/Sales and Price/Free Cash Flow. They are better for statistical studies than price-to-something ratios, which are unusable or non-available when the \"something\" is close to zero or negative (for example, companies with negative earnings). I also look at two momentum metrics for each group: the median monthly return (RetM) and the median annual return (RetY). I prefer medians to averages because a median splits a set in a good half and a bad half. A capital-weighted average is skewed by extreme values and the largest companies. My metrics are designed for stock-picking rather than index investing. Value and Quality Scores I calculate historical baselines for all metrics. They are noted respectively EYh, SYh, FYh, ROEh, GMh, and they are calculated as the averages on a look-back period of 11 years. For example, the value of EYh for food in the table below is the 11-year average of the median Earnings Yield in food companies. The Value Score (\"VS\") is defined as the average difference in % between the three valuation ratios (EY, SY, FY) and their baselines (EYh, SYh, FYh). The same way, the Quality Score (\"QS\") is the average difference between the two quality ratios (ROE, GM) and their baselines (ROEh, GMh). The scores are in percentage points. VS may be interpreted as the percentage of undervaluation or overvaluation relative to the baseline (positive is good, negative is bad). This interpretation must be taken with caution: the baseline is an arbitrary reference, not a supposed fair value. The formula assumes that the three valuation metrics are of equal importance. Current Data The next table shows the metrics and scores as of writing. Columns stand for all the data defined above.     VS QS EY SY FY ROE GM EYh SYh FYh ROEh GMh RetM RetY   Staple/Food Retail 6.87 5.08 0.0497 2.0675 0.0251 19.82 19.38 0.0395 1.8997 0.0292 16.58 21.38 5.99% 13.98%   Food 6.38 -8.48 0.0525 0.6747 0.0220 13.33 31.83 0.0449 0.6381 0.0228 15.29 33.20 6.02% -6.24%   Beverage 6.32 2.14 0.0376 0.2621 0.0178 25.85 49.71 0.0342 0.2575 0.0166 23.60 52.47 5.92% -0.37%   Household prod. 38.60 -3.71 0.0414 0.9859 0.0778 14.82 42.76 0.0447 0.8775 0.0369 16.77 41.03 12.61% 33.53%   Personal care -6.41 4.13 0.0332 0.3927 0.0183 20.08 61.98 0.0358 0.4213 0.0193 20.40 56.45 5.14% -6.34%   Tobacco 32.47 -28.19 0.0821 0.5135 0.0276 20.19 43.19 0.0610 0.5160 0.0169 33.69 51.60 11.66% 11.05%   Click to enlarge Value And Quality Chart The next chart plots the Value and Quality Scores by industry (higher is better). Value and quality in consumer staples (Chart: author; data: Portfolio123) Evolution Since Last Month Valuation has deteriorated in the tobacco and household products industries. Nonetheless, quality has improved in household products. Value and quality variation (Chart: author; data: Portfolio123) Momentum The next chart plots momentum scores based on median returns. Momentum in consumer staples (Chart: author; data: Portfolio123) Interpretation According to my S&P 500 dashboard, the consumer staples sector is slightly undervalued relative to 11-year averages. The household product industry is the most undervalued, and its quality score is close to the historical baseline. The tobacco industry is also materially undervalued, but with a bad quality score. A note of caution about sample size: there are only five tobacco companies in my reference universe, so statistics in this industry aren’t the most reliable. Other subsectors are close to their baselines for both value and quality scores. Fast facts on KXI The iShares Global Consumer Staples ETF started investing operations on 09/12/2006 and tracks the S&P Global 1200 Consumer Staples Capped Index. It has 100 holdings, a 30-day SEC yield of 2.31% and a total expense ratio of 0.41%. It is more expensive than U.S. ETFs like XLP, whose fee is 0.09%. About 62% of asset value is invested in U.S. companies. Large and mega-cap companies represent 81% of assets. The portfolio is quite concentrated: the top 10 holdings, listed in the next table, represent 48.9% of asset value and the largest position weighs 9.2%. However, KXI is more diversified than XLP, where the top 10 holdings weigh 70.2% and the heaviest position 14.7%.   Ticker Name Weight% EPS growth %TTM PE ttm PE fwd Yield   PG Procter & Gamble Co. 9.19 6.5263 27.4456 25.6662 2.3984   COST Costco Wholesale Corp. 8.19 12.314 51.8865 49.2235 0.5851   OTCPK:NSRGY* Nestlé SA 4.98 31.0927 22.4098 19.2163 3.2302   PEP PepsiCo, Inc. 4.68 39.9608 27.561 22.413 2.96   KO The Coca-Cola Co. 4.63 9.648 25.441 22.4347 3.0638   WMT Walmart, Inc. 4.31 34.3068 33.457 26.6955 1.2967   PM Philip Morris International, Inc. 4 -8.674 19.6921 15.9681 5.1659   UL* Unilever PLC 3.51 -9.8687 19.398 18.4269 3.4072   OTCPK:LRLCY* L'Oréal SA 2.92 10.6606 39.5249 35.0921 1.4422   MDLZ Mondelez International, Inc. 2.46 9.8558 22.8644 20.4984 2.3637   Click to enlarge * US tickers for convenience. The fund hold stocks in the primary exchanges. Since 10/1/2006, KXI has underperformed the US consumer staples sector benchmark XLP by 1.9 percentage point, and shows a deeper maximum drawdown. However, the correlation between the two funds is high: 0.94 based on monthly returns.     Total Return Annual Return Max Drawdown Sharpe StdDev   KXI 269.56% 7.70% -42.27% 0.53 12.67%   XLP 394.86% 9.50% -32.39% 0.68 12.31%   Click to enlarge In summary, KXI is a good instrument for investors seeking a global exposure in consumer defensive stocks. It is not currency-hedged, which may be good or bad depending on one’s expectation about the dollar. The portfolio is quite heavy in the top two holdings: Procter & Gamble, and Costco have an aggregate weight of 17.4%. Investors seeking a more diversified portfolio may prefer Invesco S&P 500 Equal Weight Consumer Staples ETF (RSPS). Dashboard List I use the first table to calculate value and quality scores. It may also be used in a stock-picking process to check how companies stand among their peers. For example, the EY column tells us that a food company with an earnings yield above 0.0525 (or price/earnings below 19.05) is in the better half of the industry regarding this metric. A Dashboard List is sent every month to Quantitative Risk & Value subscribers, with the most profitable companies standing in the better half among their peers regarding the three valuation metrics at the same time. The stocks below are part of the list sent to subscribers a few weeks ago.   BG Bunge Global SA   ADM Archer-Daniels-Midland Co.   JBSS John B. Sanfilippo & Son, Inc.   TAP Molson Coors Beverage Co.   USNA USANA Health Sciences, Inc.   MED Medifast, Inc.   EPC Edgewell Personal Care Co.   Click to enlarge It is a rotational model with a statistical bias toward excess returns on the long-term, not the result of an analysis of each stock.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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