The markets and exchange traded funds (ETFs) aren’t as stable as they used to be, and people are starting to invest for a worst-case scenario. Investors are buying into a type of “ultimate bunker portfolio,” with all the basic essentials to weather out the storm.
A recent trend among investors has pushed up prices on investments tied to producers of bottled water, canned goods, dehydrated broth, gas masks and auxiliary generators, reports Jonathan Cheng for The Wall Street Journal. A portfolio of the 18 companies tied to those markets would have been up 24% this year, compared to a decline of 4.5% for the broader market.
- Hormel Foods Inc (NYSE: HRL), producer of Spam and instant foods, is up 12% year-to-date.
- Dr Pepper Snapple Group (NYSE: DPS) has jumped 32% year-to-date.
- Cummins Inc. (NYSE: CMI), maker of auxiliary generators and truck engines, has surged 66% this year.
- Airgas Inc. (NYSE: ARG), producer of hard hats and gas masks, has gained after a hostile bid.
- J.M. Smuckers (NYSE: SJM) gained as more families ate at home.
- Ball Corp. (NYSE: BLL), maker of metal cans and package, gained 9% this year, aided by higher earnings.
This portfolio strategy for betting on the onset of Armageddon has reflected investors’ preference for companies that are relatively immune to the economic volatility. Consumers are also buying more basic pantry items, such as coffee, peanut butter and jelly. Most of these companies have increased dividends this year. [ETFs to Cope With Slow Consumer Spending.]
Basic consumer staples have remain necessary items in any type of economic situation. For the tough market environment, gold and Treasuries have also seen a spike in safe-haven interest. [The Top 5 ETFs of August.]
Also be sure to use a trend following strategy. If you are following the 200-day moving average with a stop loss of 8%, you’ve no doubt noticed that most indexes have moved 8% up or down and crossed their 200-day moving averages multiple times so far this year. It makes for some frustrating investing, but don’t abandon your strategy, whatever it may be. [Alternatives to the Luxury ETF.]
For more information on consumer staples, visit our consumer staples category. The ETF Analyzer shows eight funds that target this retail subsector; visit the Analyzer to sort by assets, performance and more. Click on the ticker to be taken to the ETF Resume, where you can do further research on holdings and construction.
- First Trust Consumer Staples AlphaDEX (NYSEAca: FXG)
- SPDR S&P Retail (NYSEArca: XRT)
- PowerShares Dynamic Consumer Staples (NYSEArca: PSL)
- Rydex S&P Equal Weight Consumer Staples (NYSEArca: RHS)
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.