With May almost here, it is time for investors to commence the annual pondering of the “Sell in May and go away” axiom.
While May 1 does mark the beginning of the weakest six-month period for stocks, that does not mean investors should liquidate equity positions and flee to bonds and cash. In fact, some small-cap sector exchange traded funds could prove durable in the months ahead.
Some sectors have their day in the summertime sun, while others skate along smoothly in winter according to Sam Stovall, US equity strategist for S&P Capital IQ. For instance, since 1995, the S&P SmallCap 600 consumer staples and health care groups posted average price gains of 5.3% and 5.4%, respectively, to the S&P SmallCap 600’s average rise of 2.5%. Meanwhile the S&P SmallCap 600 consumer discretionary sector declined on average 0.8%,” said S&P Capital IQ in a new research note.
Investors can access small-caps in the consumer staples and healthcare sectors with the PowerShares S&P SmallCap Consumer Staples Portfolio (NasdaqGM: PSCC) and the PowerShares S&P SmallCap Health Care Portfolio (NasdaqGS: PSCH). [Small-Cap Consumer ETFs Could Surge]
“PowerShares S&P SmallCap Consumer Staples (PSCC) has only $35 million in assets and has a 0.29% expense ratio. However, it has only 17 holdings, less than half the 38 in theConsumer Staples Select Sector SPDR (NYSEArca: XLP). Packaged food & meats companies such as Sanderson Farms (SAFM) make up 41% of PSCC’s assets, while the sub-industry is just 17% of XLP. Meanwhile, household product companies such as WD-40 Company (WDFC) make up only 9% of assets, instead of 19% for XLP,” according to S&P Capital IQ.
PSCC is off 0.5% this year while XLP, the largest consumer staples ETF, is higher by 0.9%.
PSCH is one of this year’s top-performing non-leveraged healthcare ETFs. Up 16.1%, PSCH has outperformed its large-cap equivalent, the Health Care Select Sector SPDR (NYSEArca: XLV), by a margin of more than two-to-one.
What it lacks in pharmaceuticals and biotech exposure, PSCH makes up for with heavy weights to healthcare equipment manufacturers and services providers. Those sub-sectors combine for roughly two-thirds PSCH’s weight. That is nearly double the weight to large-cap equipment makers and services providers featured by XLV. [Small-Cap Sector ETF Star]
“While both of these PowerShares ETFs trade less frequently and with wider bid/ask spreads than most sector products including those from SSGA, we believe they can play a meaningful role to support sector rotation strategies,” said S&P Capital IQ.
The research firm has an overweight rating on PSCC and a marketweight rating on PSCH.
PowerShares S&P SmallCap Consumer Staples Portfolio
