Hedgie Does for XLB What He Didn’t for XLP

July 18th at 8:00am by Tom Lydon

Hedge fund manager Nelson Peltz, founder of Trian Fund Management, grabbed the attention of plenty of consumer staples investors Wednesday when he reiterated that PepsiCo (NYSE : PEP) should acquire Mondelez International (NasdaqGS: MDLZ). Those comments were made at the CNBC/Institutional Investor Delivering Alpha conference.

Peltz’s comments did not do much to lift the Consumer Staples Select Sector SPDR (NYSEArca: XLP) or the Vanguard Consumer Staples ETF (NYSEArca: VDC), but speculation about this involvement in another blue-chip sent some other sector ETFs rallying into Wednesday’s close. During the conference, CNBC reported that Peltz had amassed a stake in Dow component and chemicals giant DuPont (NYSE: DD), according to the Associated Press.

Peltz did not confirm or deny DuPont stake for Trian, but the speculation was enough to send the stock up 5.3%. And that was enough to boost the Materials Select Sector SPDR (NYSEArca: XLB) and the iShares U.S. Basic Materials ETF (NYSEArca:IYM). Both funds finished the day higher by about 1%. [Materials ETFs Outperforming]

DuPont is XLB’s second-largest holding with a weight of 10.3% while the stock is also IYM’s number two holding with an allocation of 9.5%. Monsanto (NYSE: MON) is the top holding in both funds.

The Peltz/DuPont rumor helps add to what has been a strong July thus far for both ETFs. With Wednesday’s gains, IYM and XLB are both up about 4% since the start of the month. XLB is usually the top-performing of the nine sector SPDR ETFs in the month of July, though this month the fund has trailed its consumer discretionary and financial services counterparts. [King Dollar has Hit These SectorETFs]

Year-to-date, XLB is now up 4.4%, but IYM is lower by 1%. That performance difference could be the result of the allocation difference to DuPont. IYM actually has the larger weight to chemicals makers by 50 basis points, but the lower weight to DuPont. XLB also has a slightly larger weight to LyondellBasell Industries (NYSE: LYB), a stock that has gained 15% this year.

Materials Select Sector SPDR

ETF Trends editorial contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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