This article is part of a regular series of thought leadership pieces from some of the more influential ETF strategists in the money management industry. Today's article is by Clayton Fresk, CFA, portfolio management analyst at Georgia-based Stadion Money Management.
Since mid-February, the broad market as measured by the S&P 500 traded essentially sideways for six months, followed by a sharp sell-off in mid-August, followed by a bit of choppy tumultuous trading since.
From Feb. 17 through Sept. 25, the S&P 500 is down nearly 7 percent. However, not all equity names are trading lower over the same period. This discrepancy could be from these names trading stronger in the six months leading up to the sell-off, experiencing a smaller drawdown than the broad market since, or a combination of both.
In the following, I will look at a few U.S. ETF names that have seen positive performance (first absolute, then relative) since Feb. 17, and what has driven said performance.
Scanning through the list of all ETFs and their individual performance since mid-February, one sector that stands out with strong performers is consumer staples.
Excluding leveraged and inverse funds, three names in particular that stand out (with performance from Feb. 17, 2015 through Sept. 25, 2015) are:
- PowerShares S&P Small Cap Consumer Staples (PSCC | B-36), up 6.98 percent
- PowerShares DWA Consumer Staples Momentum (PSL | B-59), up 5.95 percent
- PowerShares Dynamic Food and Beverage (PBJ | B-55), up 5.56 percent
These three names use different methodologies and took slightly different paths to their performance.
PSCC focuses on small-cap names only, so it had the dual benefit of broad small-cap outperformance (measured by the S&P 600) over the S&P 500, particularly since the end of July, and broad consumer staples outperformance over the broad market, particularly since early June.
PBJ had the benefit over the period of focusing on food and beverage names only. As such, it has no exposure to the household and personal products industry, which has been a lagging industry within the consumer staples sector. It also has a small carryover into some strongly performing restaurant names that do not fall into the GICS Consumer Staples classification (i.e., Starbucks).
PSL follows a momentum-based index, and that factor in general has seen strong relative performance since the end of April (in this case, measuring via the MSCI USA and the MSCI USA Momentum indexes). The index providers classification also differs slightly from the GICS classification, as the portfolio only holds about 60 percent staples, as classified by GICS.