U.S. Markets close in 1 hr 54 mins
  • S&P 500

    +8.51 (+0.21%)
  • Dow 30

    -107.97 (-0.32%)
  • Nasdaq

    +102.74 (+0.74%)
  • Russell 2000

    -17.43 (-0.78%)
  • Crude Oil

    +0.42 (+0.70%)
  • Gold

    +13.00 (+0.75%)
  • Silver

    +0.52 (+2.08%)

    +0.0031 (+0.2629%)
  • 10-Yr Bond

    -0.0480 (-2.87%)
  • Vix

    -0.24 (-1.42%)

    -0.0002 (-0.0124%)

    -0.2800 (-0.2560%)

    +3,526.80 (+5.89%)
  • CMC Crypto 200

    +65.05 (+5.03%)
  • FTSE 100

    +1.37 (+0.02%)
  • Nikkei 225

    +212.88 (+0.72%)

Meet This Year's Best Consumer Staples ETF

ETF Professor

Even with all the concern regarding higher interest rates, a scenario that was realized earlier this month, rate-sensitive consumer staples stocks and exchange traded funds have been solid performers in 2015. Two of the 14 Dow Jones Industrial Average Stocks that are up this year are staples stocks: Procter & Gamble Inc. (NYSE: PG) and Wal-Mart Stores Inc. (NYSE: WMT).

Add to that, the Consumer Staples Select Sector SPDR (NYSE: XLP) and the Vanguard Consumer Staples ETF (NYSE: VDC) are up 7.7 percent and 6.7 percent, respectively, this year. Those are solid performances, particularly in the face of rising interest rates, but those are from the best showings among staples ETFs. Honors for 2015's best staples go to the PowerShares DWA Consumer Staples Momentum Portfolio (NYSE: PSL), which is up 14 percent year-to-date.

PSL is a smart or strategic beta ETF, meaning it is not capitalization-weighted as are rivals such as XLP and VDC. That also means PSL is not dominated by the likes of Procter & Gamble and Wal-Mart as are XLP and traditional cap-weighted staples ETFs.

PSL's stellar year-to-date showing relative to its cap-weighted performers could imply, to some investors, that significant risk is involved with betting on PSL over its more traditional rivals. However, that is not the case. Not only has PSL offered superior returns over standard consumer staples ETFs, the PowerShares offering has posted better risk-adjusted returns. For example, PSL's volatility this year has been 14.6 percent, according to . That is 100 basis points in excess of VDC, but PSL has outpaced the Vanguard Staples ETF by 730 basis points.

PSL follows the Dorsey Wright Consumer Staples Technical Leaders Index, a benchmark that “is designed to identify companies that are showing relative strength (momentum), and is composed of at least 30 common stocks from the NASDAQ US Benchmark Index,” , the fourth-largest U.S. ETF issuer.

PSL has swelled in popularity this year. When we highlighted the ETF in late September, it had less than $221 million in assets under management. Since then, PSL's assets under management tally has surged north of $369 million. Only six PowerShares ETFs have added more new assets in 2015 than PSL.

PSL break from the norm among staples ETFs is okay because over the past year, the Dorsey Wright Consumer Staples Technical Leaders Index has offered nearly double the returns of the S&P 500 consumer staples index and over the past three- and five-year periods, PSL has topped that index. PSL started tracking the Dorsey Wright index early last year.

PSL's top 10 holdings include well-known names such as Altria Group Inc. (NYSE: MO), Constellation Brands Inc. (NYSE: STZ) and Monster Beverage Corp. (NASDAQ: MNST).

See more from Benzinga

© 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.