Market Overview

An Unsung Consumer Staples ETF

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An Unsung Consumer Staples ETF

Embracing defensive sectors has been rewarding this year, but groups such as consumer staples and utilities can often be boring. Some exchange traded funds can help investors bring some spice to those normally staid groups.

For investors looking for a little more excitement out of the consumer staples sector, the First Trust Nasdaq Food & Beverage ETF (NASDAQ: FTXG) is a fund to consider. Often overlooked relative to other staples ETFs, FTXG recently turned 3 years old.

The fund is up 16.13% year to date and was one of just two ETFs to hit an all-time high Tuesday, though the First Trust fund is trailing the Consumer Staples Select Sector SPDR (NYSE: XLP) by about 275 basis points this year.

Why It's Important

As its name implies, FTXG is a food and beverage ETF, so it avoids controversial tobacco stocks as well as steadier consumer products names like Procter & Gamble (NYSE: PG) as well as retailers such as Walmart (NYSE: WMT).

FTXG follows the US Smart Food & Beverage Index, a benchmark that uses a variety of measurements to build a non-cap weighted portfolio of food and beverage names. The fund can hold up to 30 stocks and those names are scored based on trailing 12-month volatility, value as measured by cash flow to price and average price appreciation over the trailing three-, six-, nine- and 12-month periods.

FTXG allocates nearly 80% of its weight to food products companies and 13.35% to soft drink makers. Pepsico (NASDAQ: PEP) is the fund's largest holding at a weight of 8.07%.

What's Next

While FTXG aims to have a value tilt, its price-to-earnings ratio of 20.39 is elevated relative to broader equity benchmarks, but as a sector, consumer staples often trades at a premium to the broader market due to its above-average dividend yield and defensive traits.

For investors looking to avoid tobacco stocks and consumer products names while remaining engaged with the consumer staples sector, FTXG is a fund to consider.

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