Written by Gary Gordon, MS, CFP® of www.ETFexpert.com
Can the American diet
constitute a thesis for an investing concept? Even in a nation where economic
growth has slowed considerably, we still have to eat. And for many of us, that
means fast food.
You know the names,
even if you’re not a French fry connoisseur: McDonald's, KFC, Burger
King, Wendy’s, Carl's Junior, Pizza Hut, Jack in the Box. The chain
eateries exist in nearly every town across the United States.
Moreover, most of
these American companies are going global. In fact, McDonald's
makes more money from overseas operations than it does domestically. And if it
hasn't happened for the rest of the junk food standouts… it will.
In truth, there isn't
a pure exchange-traded fund for investing in "fast food nation."
However, there's one investment that comes rather close.
The PowerShares
Dynamic Food & Beverage Fund (PBJ) consists
of 30 companies. The top 10 holdings typically account for roughly half of the
fund’s direction. Companies like McDonald's and Yum! Brands are prominent
here.
It should be noted
that most fast food companies fall into the category called, "Consumer
Staples." One might expect that the PowerShares Dynamic Food & Beverage Fund
(PBJ) might chart a similar path
to the Select
Spider Consumer Staples Fund (XLP). Moreover, people need to eat
and drink, no matter how a country’s economy is doing.
Indeed, both XLP and PBJ have charted similar paths over the last 2 years. On
closer inspection, though, we are seeing a greater preference for "peanut
butter" and "toothpaste." In fact, some people are even starting
to question whether Americans will go out for a Big Mac or Whopper.
It should be noted,
however, that the smallest signs of life in consumer purchasing habits should
propel the PowerShares
Dynamic Food & Beverage Fund (PBJ) further along than the Select Spider Consumer Staples Fund
(XLP).
(At least that was the
case up until June/July 2007. Ever since, the Fed has been slow to offer up
"substantive" rate cut action.)
Disclosure Statement: ETF
Expert is a web log ("blog") that makes the world
of ETFs easier to understand. Pacific Park Financial, Inc.,
a Registered Investment Advisor with the SEC, may hold positions in the ETFs,
mutual funds and/or index funds mentioned above. Investors who are interested
in money management services may visit the Pacific
Park Financial, Inc. web site.
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