Each day we hear about how consumers world-wide are tightening their belts and spending less. Even the rich have pulled back, not a surprise considering, according to the Economist, high-net-worth individuals have lost a quarter of their wealth. Consumer confidence, which we charted a few weeks back has improved but is still historically bleak.
Yet, provided that government doesn t completely kill capitalism outright, this pullback in shopping won t always be the case. For contrarian investors looking for a diversified way of playing the global consumer, a lesser-known ETF has collected many of the top names into one simple play.
SPDR S&P International Consumer Discretionary Sector ETF (IPD)
SPDR S&P International Consumer Discretionary ETF
|Top holdings||% of Total|
|Toyota Motor Corp||10.03%|
|Honda Motor Co||4.15%|
|Hennes & Mauritz||1.85%|
|LG Electronics Inc||1.81%|
|LVMH Moet Hennessy||1.74%|
Approximately 20% of the fund is held in automotive stocks, and even though General Motors (GM)
In recent months, assets across the board have become much more closely correlated. When consumer stocks rally, so does technology and real estate and crude oil and the South African rand. These days, there isn t much discrimination among risk.
That s most certainly the case even when comparing domestic and global consumer stocks. A casual glance over the last six months indicates the International Consumer Discretionary ETF moves in near-lockstep with its domestic counterpart, the
), which holds U.S. consumer stalwarts like
Consumer Discretionary Select Sector SPDR Fund (XLY)
Buy What Consumers Buy
Consumer Discretionary SPDR (NYSE) vs. SPDR S&P International Consumer Discretionary Sector ETF
Yet I find the internationals ETF s 41% allocation to Japan uniquely appealing, given most analysts' low expectations for both Japanese stocks and consumers world-wide. Despite a sharp rally since March, the fund and underlying index are still down 45% over the past year.
Many ETFs offer exposure to assets simply not available to traditional U.S. stock investors, such as platinumsuch as Claymore/AlphaShares China Real Estate ETF (TAO)
With the International Consumer Discretionary ETF, the benefit isn t access as most of the larger holdings trade in the U.S. as depository receipts but simple convenience. Consumers are hurting, and this is a one-stop way of betting on their eventual revival, with a unique emphasis on autos and Japan.
After six weeks of gains, equities in general would now appear overbought, with nearly 90% of the S&P 500 trading above their 50-day moving average. Opportunities like this ETF, or the similar retail-oriented real estate ETF I mentioned a few months back aren t short-term scalps, rather ideas to hold over an entire cycle, establishing a reasonably-sized position when the data and herd perspective are dour and having the patience to wear it until valuations improve.
One Final Cup
I m pleased to report the Chicago Tea Party Protest mentioned in last week s column was a tremendous success, with over 2,000 peacefully gathering to listen to a variety of provocative speakers, including yours truly.
Crowd estimated at over 2,000 at Federal Plaza, Chicago
> Images courtesy of Kimsch1 from Flickr.com>
At the time of writing, Hoenig's fund held shares of Panasonic (PC).>