Consumer Demand Will Drive These Profits

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the consumer goods industry to thrive over time, the iShares Dow Jones US Consumer Goods (NYSE: IYK  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF's expense ratio -- its annual fee -- is a relatively low 0.47%. (It sports a dividend yield near 2%, as well.)

This ETF has performed rather well, beating the world market over the past three, five, and 10 years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

With a low turnover rate of 6%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Plenty of consumer goods companies had strong performances over the past year. Tobacco giants Altria (NYSE: MO  ) and its non-U.S.-focused cousin Philip Morris International (NYSE: PM  ) , for example, surged 45% and 35%, respectively. Altria's believers like its strong dividend history, its growing smokeless tobacco business, and its stake in beverage giant SAB Miller. Detractors point to factors that make Philip Morris look more attractive, such as America's shrinking base of smokers, due in part to increasing regulation of the industry and higher taxes driving up prices. Competition from discount brands is also a concern. Altria recently yielded 4.6%, while Philip Morris yielded 3.4%.

Other companies didn't do as well last year, but could see their fortunes change in the coming years. Ford (NYSE: F  ) , for example, sank by 23%, as its fleet sales took a hit. Trouble in Europe has also put pressure on the company. Still, its future looks bright, as it develops promising new models and invests aggressively in faster-growing economies abroad.

Johnson Controls (NYSE: JCI  ) , down 31%, may not be a household name, but many of its offerings reside in garages and driveways across America, as it supplies the auto industry. The company has cited weak battery sales lately, as Americans have been hanging on to cars longer before buying new ones. The company sports a dividend yield of about 2.9%, and has been paying dividends since 1887!

The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

If you'd like to know more about Ford, and whether at its current depressed price it might be a smart buy for your portfolio, you're in luck. One of our top stock analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Get instant access to this premium report.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Ford Motor, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1976037, ~/Articles/ArticleHandler.aspx, 4/20/2014 2:32:40 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement