Consumer Staples Select Sect. SPDR (ETF) (AMEX:XLP)

The Consumer Staples Select Sector SPDR Fund (XLP) is an index fund that seeks to replicate the total return of the Consumer Staples Select Sector of the Standard and Poor's 500 Composite Stock Index. The fund manages approximately $1.61 billion worth of net assets with an expense ratio of 0.24%. The fund makes investment in industries dealing with food and drug retailing, beverages, food products, tobacco, household products and personal products.

This ETF provides exposure to the shares of market leading purveyors of everyday stuff at a low expenses ratio compared to that of its peers. The top 3 holdings Procter and Gamble, Altria Group and Wal-Mart accounting for about 42% of the corpus is a real cause of concern making it vulnerable to individual stock blowups. However there is a drawback wherein the fund concentrates more on the large cap companies of the United States that meets Standard and Poor’s profitability criteria ultimately eliminating the international behemoths with the likes of Unilever and Diageo

Analyzing the past returns, it shows that the fund has performed satisfactorily well in the last three years. Endorsing the same it had posted a 14.49% return in 2006. There is a general feeling that the stock is currently under valued and worth more owing to the funds top holding in dominant franchisee that are worth more than its current price. The defensive nature of the consumer staple sector in a slowing economy makes it very attractive. Reflecting the same it has low measures of volatility, which offers it attractive valuation with good future growth prospects. Witnessing the past trends of low cost, tax efficiency and diversification the fund looks all set to beat the market.