FXG: Consumer Staples Dashboard For August

seekingalpha08-15

Monthly article series includes industry metrics in consumer staples.The sector is undervalued relative to 11-year averages. Household products are the most undervalued subsector.Focus on FXG, a ...

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Household products are the most undervalued subsector.Focus on FXG, a ...</p>\n\n<a href=\"https://seekingalpha.com/article/4714642-fxg-consumer-staples-dashboard-for-august\">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":"FXG","symbol_name":"First Trust Consumer Staples Alphadex Fund","start_time":0,"source_url":"https://seekingalpha.com/article/4714642-fxg-consumer-staples-dashboard-for-august","article_id":"2459310164","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1040917000/image_1040917000.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2459310164","pubTimestamp":1723672034,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Monthly article series includes industry metrics in consumer staples.The sector is undervalued relative to 11-year averages. Household products are the most undervalued subsector.Focus on FXG, a consu","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"FXG":"First Trust Consumer Staples Alphadex Fund","BK4588":"碎股","BK4550":"红杉资本持仓","XLP":"消费品指数ETF-SPDR主要消费品","FDN":"First Trust Dow Jones Internet I","RSPS":"Invesco S&P 500 Equal Weight Consumer Staples ETF","BK4585":"ETF&股票定投概念"},"translate_title":"FXG：8月份必需消费品仪表板","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"FXG":1,"RSPS":1,"XLP":1,"FDN":0.9},"content_text":"Monthly article series includes industry metrics in consumer staples.The sector is undervalued relative to 11-year averages. Household products are the most undervalued subsector.Focus on FXG, a consumer staples ETF mixing value and growth.4 stocks cheaper than their peers in August.   george tsartsianidis This monthly article series includes a dashboard with aggregate industry metrics in consumer staples. It is also a review of sector ETFs like the Consumer Staples Select Sector SPDR ETF (XLP) and the First Trust Consumer Staples AlphaDEX Fund (NYSEARCA:FXG), 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 last week's closing. 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 5.62 1.08 0.0404 1.9441 0.0327 18.28 19.64 0.0393 1.8977 0.0293 16.67 21.23 -0.47% 10.38%   Food -4.96 -6.00 0.0444 0.6489 0.0188 12.66 35.02 0.0449 0.6320 0.0225 15.29 33.29 4.09% -1.88%   Beverage 24.93 2.47 0.0395 0.2687 0.0255 26.21 49.41 0.0340 0.2559 0.0166 23.67 52.46 -3.78% -15.08%   Household prod. 45.10 -1.78 0.0480 1.1978 0.0722 15.20 43.63 0.0446 0.8797 0.0377 16.80 41.16 5.27% 15.41%   Personal care -3.32 3.01 0.0318 0.3966 0.0203 19.53 62.70 0.0354 0.4173 0.0193 20.45 56.73 -1.41% -5.27%   Tobacco 6.25 -44.58 0.0793 0.4569 0.0172 8.72 43.48 0.0615 0.5190 0.0169 33.38 51.32 7.23% 28.63%   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 The value score has greatly improved in the beverage and household product industries.   Value and quality variation (Chart: author; data: Portfolio123) Momentum The next chart plots momentum data.   Momentum in consumer staples (Chart: author; data: Portfolio123) Interpretation The consumer staples sector as a whole was undervalued by about 10% relative to 11-year averages at the beginning of the month, based on my latest S&P 500 dashboard. Household products are the most undervalued industry, followed by beverage. Other subsectors are close to their historical baseline in valuation. Quality is also close to the baseline across the sector except in the tobacco industry, whose quality score is far in negative territory. FXG: a “value or growth” ETF in consumer staples First Trust Consumer Staples AlphaDEX Fund (FXG) has been tracking the StrataQuant® Consumer Staples Index since 5/8/2007. It has a total fee of 0.63%, much more expensive than XLP (0.09%). As described by First Trust, the underlying index is constructed by ranking the stocks in the Russell 1000 Index separately based on growth and value factors. Each stock retains only one score, growth or value based on its style classification by Russell. Stocks classified in both growth and value styles get the best of both scores. The greater of the top 75% of the sector or 40 stocks is selected in the underlying index. If the number of eligible stocks is below 40, all stocks are included. Then, selected stocks are weighted based on their ranking quintiles, with an equal weight within each quintile. The index is reconstituted quarterly. Since inception, FXG has lagged XLP by 42 bps in annualized return. Moreover, risk measured in drawdown and volatility is higher than for the sector benchmark.     Total Return Annual Return Max Drawdown Sharpe Std Dev   FXG 330.79% 8.83% -38.69% 0.56 14.70%   XLP 360.31% 9.25% -32.39% 0.67 12.40%   Click to enlarge However, FXG has been shortly ahead of XLP for 3 years:   FXG vs. XLP, 3-year return (Portfolio123) As of writing, the fund has 40 holdings. The next table lists the top 10 names, representing 40% of asset value.    Name Ticker Classification Weighting   Pilgrim's Pride Corporation PPC Food Producers 4.66%   Darling Ingredients Inc. DAR Food Producers 4.48%   Molson Coors Beverage Company TAP Beverages 4.23%   Freshpet, Inc. FRPT Food Producers 4.09%   Seaboard Corporation SEB Food Producers 3.92%   Casey's General Stores, Inc. CASY Personal Care, Drug and Grocery Stores 3.90%   McKesson Corporation MCK Personal Care, Drug and Grocery Stores 3.83%   Bunge Global S.A. BG Food Producers 3.67%   Ingredion Incorporated INGR Food Producers 3.67%   The J.M. Smucker Company SJM Food Producers 3.52%   Click to enlarge In summary, FXG is a “smart beta” ETF, selecting stocks based on value and growth criteria. The methodology looks great in theory, but the fund has failed to outperform the sector benchmark since its inception in 2007. Moreover, XLP is much more liquid and has a much cheaper fee. Both funds are quite concentrated in the top holdings. Investors willing to limit the risks related to individual companies may prefer the 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 0.0444 (or price/earnings below 22.52) 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. The stocks below are part of the list sent to subscribers a few weeks ago.   BG Bunge Global SA   TAP Molson Coors Beverage Co.   USNA USANA Health Sciences, 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.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2459310164"}