Consumer staples exchange traded funds with large allocations to Dow component Procter & Gamble (NYSE: PG) traded modestly lower Friday following news that Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A) is eliminating its stake in the consumer products giant.
Berkshire is exchanging the $4.7 billion worth of P&G shares it owns to acquire the Ohio-based company’s Duracell battery business. Buffett’s Berkshire became one of P&G’s largest shareholders by way of the company’s $57 billion acquisition of Gillette in 2005.
The Consumer Staples Select Sector SPDR (NYSEArca: XLP), the largest consumer staples ETF, lost nearly 1% Friday. That ETF entered Friday with a 13.43% weight to P&G, or nearly 400 basis points more than its allocation to Coca-Cola (NYSE: KO), XLP’s second-largest holding.
Coca-Cola is another massive Berkshire holding. Buffett’s conglomerate owned 400 million shares of the soft-drink giant at the end of the second, making it Berkshire’s second-largest equity holding behind Wells Fargo (NYSE: WFC).
Berkshire held more than 101 million P&G shares in 2007, according to Reuters, but that number had dwindled to just under 52.8 million at the end of the second quarter.
The Vanguard Consumer Staples ETF (NYSEArca: VDC) and the Fidelity MSCI Consumer Staples Index ETF (NYSEArca: FSTA) were also lower by nearly 1% late Friday. VDC had a 12% weight to P&G at the end of September. FSTA, which has needed barely more than a year of trading to haul in almost $182 million in assets, has a 12.5% weight to P&G. [Stellar Staples ETFs]
Although Buffett’s departure from P&G appears well-timed on the basis that the stock jumped to a new all-time earlier this week, it comes after several years of the stock being a laggard.
P&G is up 42.3% over the past five years, but over the same period, rival Colgate-Palmolive (NYSE: CL) is higher by almost 61% while XLP and the SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) are up an average of 73.5%.
Assuming no other changes, Berkshire’s equity portfolio still contains significant exposure to some big-name holdings in staples ETFs. In addition to Coca-Cola, Berkshire had stakes in Wal-Mart (NYSE: WMT), Costco (NasdaqGS: COST), Kraft (NasdaqGS: KRFT) and Mondelez International (NasdaqGS: MDLZ) at the end of the second quarter. Those five stocks combine for nearly 26% of XLP’s weight.
Consumer Staples Select Sector SPDR
