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Heinz-Kraft News Lifts Food & Beverage ETF

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Heinz-Kraft News Lifts Food & Beverage ETF

This week it was announced that Kraft Foods Group Inc (NASDAQ: KRFT) would combine with H.J. Heinz Co. in a move engineered by Brazil-based 3G Capital and Berkshire Hathaway Inc (NYSE: BRK-B). 

The combination of these two iconic brands will create a powerhouse consumer staples company with far reaching global exposure. 

On Thursday, Kraft rose more than 35 percent on news of the deal, which will include a special cash dividend and 49 percent ownership share in the new combined company. 

This jump also impacted a specialty ETF designed to capitalize on the strength of food, beverage, and restaurant stocks.

The PowerShares Dynamic Food & Beverage Portfolio (NYSE: PBJ) invests in a portfolio of 30 U.S. food and beverage companies based on strict selection criteria that includes price and earnings momentum, quality and value. 

Kraft is the eighth largest holding in PBJ, with a 4.69 percent allocation, that sent the fund soaring to new 52-week highs on Thursday.

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PBJ has returned over 20 percent during the last 12 months and is up more than 5 percent in 2015. 

In addition to Kraft, this fund also has significant allocations to well-known companies such as Kroger Co (NYSE: KR), Starbucks Corporation (NASDAQ: SBUX), and General Mills, Inc. (NYSE: GIS).

One of the interesting facets of PBJ is that the index does not discriminate by market cap requirements.  As a result, there is a relatively level allocation to small, mid, and large-cap companies. 

Related Link: Meet The Best New ETF Of 2014

There is currently more than $250 million invested in the fund and it charges an expense ratio of 0.61 percent.

PBJ is relatively unique in that it is the only food-based ETF currently focused on this industry group.  Nevertheless, a fund of this nature is generally grouped in the consumer staples space, which covers a broad spectrum of essential products. 

For example, the sector benchmark Consumer Staples Select Sector SPDR (NYSE: XLP) has a 2 percent allocation to Kraft based on its market-cap weighted index. 

Ultimately the news of this takeover will create short-term value for shareholders of these ETFs and may continue to shine the spotlight on other stocks in the food and beverage industry as well.

 

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