Market Overview

ETF Sleuth: Flight to Low Beta? (SPLV, XLP)


Volume continues to be anemic across U.S. equity exchanges. From the Reuters market wrap for April 11, 2012: Volume was light, with about 6.31 billion shares traded on the New York Stock Exchange, the American Stock Exchange and the Nasdaq, below last year's daily average of 7.84 billion.

To that end, any stock or ETF sporting turnover well above its daily average on Wednesday without the benefit of a news event such as earnings or analyst chatter is going to stick out. In the case of two low-beta ETFs, they really stick out.

Just look at the PowerShares S&P 500 Low Volatility ETF (NYSE: SPLV) and the Consumer Staples Select Sector SPDR (NYSE: XLP). In the case of XLP, that ETF saw volume of almost 14.6 million shares on Wednesday, almost 2.4 times the daily average. SPLV's volume percentage increase was even more impressive. Turnover in that ETF was almost eight times the daily average.

If these substantial volume increases, particularly on a light volume day, tell us anything it might be that it is in fact time to love low-beta ETFs.

SPLV still isn't a year old, but just a few weeks shy of its first birthday, the fund has over $1.6 billion in AUM easily making it one of the most successful ETFs to debut last year. The 100 stocks that SPLV tracks are the S&P 500 constituents with the lowest realized volatility over the past 12 months. Not surprisingly, that means consumer staples and utilities combine for over 59% of the fund's weight.

SPLV's top-10 holdings include Procter & Gamble (NYSE: PG), General Mills (NYSE: GIS) and Abbot Labs (NYSE: LAB). No surprises there either.

With nearly $5.4 billion in AUM, XLP is the king of staples ETFs. P&G, Coca-Cola (NYSE: KO) and Philip Morris (NYSE: PM) combine for 37% of that ETF's weight.

Year-to-date, both funds have been outpaced by the S&P 500, but over the past month, SPLV and XLP have offered better returns. It's often said that one day does not make a new trend, but SPLV and XLP may have been sending a signal on Wednesday. The signal is risk on is still off.

Posted-In: Long Ideas News Sector ETFs Broad U.S. Equity ETFs Short Ideas New ETFs Technicals Pre-Market Outlook


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