Typically, ETFs rated underweight by AltaVista “consist of stocks trading at relatively expensive valuations and/or having below-average fundamentals,” according to the research firm.
There are, however, signs that XLP could pick up the pace heading into the end of the year. For example, only three of the ETF’s top-10 holdings have traded lower over the past month with only Walgreen (NYSE: WAG) doing so in noticeable fashion. XLP’s top-10 holdings, a group that combines for nearly two-thirds of the ETF’s weight, also feature Dow components Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO) and Wal-Mart (NYSE: WMT).
“Sales growth is forecast to pick up this year and next, which could translate into even faster earnings growth as margins tick upward. The sector’s P/E multiple has stalled in a narrow range for the last 18 months or so, and has lost ground relative to the S&P500 although in absolute terms it remains at a modest premium,” said AltaVista of the staples sector.
Consumer Staples Select Sector SPDR
