Courtesy of John Nyaradi.
Courtesy of Benzinga
In early May, Global X rolled out the Global X Food ETF (NYSE: EATX), one of the more unique approaches to the stodgy food sector, and while this ETF has not gone ignored, this volatile market environment means it’s the ideal time to take a more direct look at ETFs that can be considered “defensive.”
EATX, which is home to 50 stocks and an expense ratio of 0.65%, made its debut on May 3. By early August, the fund had just under $3 million in assets under management. Today, EATX has over $3.6 million in AUM, so on a percentage basis the ETF’s AUM total is growing at an impressive clip.
There are some interesting factors to consider with EATX. Frankly, we should these factors are what sets the ETF apart from standard fare in the staples ETF universe. First, most ETFs like this either focus solely on U.S.-based companies or take an ex-U.S. approach. EATX gives investors the best of both worlds as the U.S. gets a weight of 45.5%, but the rest of the ETF is global and roughly 20% of EATX is allocated to emerging markets
. Good luck getting that much EM exposure from a comparable ETF.
Another thing to love about EATX is the holdings. Every food ETF you come across is going to offer some exposure to Dow component Kraft (NYSE: KFT), the largest U.S. food company and EATX does with a weight of nearly 5.1%.
The thing is food stocks are longer-term plays and knowing that, smart investors want exposure to better food stocks than Kraft, which is flat over the past five years. Over the same time, Nestle (PK: NSGRY), General Mills (NYSE: GIS) and Hershey (NYSE: HSY) have all thrashed Kraft’s performance. Combined, General Mills, Nestle and Hershey equal about 14% of EATX’s weight.
Few if any ETFs offer a comparable weight to those stocks and no other ETF allocates as much to General Mills as EATX does.
Simply put, global demographic trends, including rising middle classes in the emerging markets, make food companies with high international exposure and ETFs such as EATX compelling long-term plays.
Let’s put it this way, in 2011 alone, CEOs from General Mills, Kraft and Heinz (NYSE: HNZ) have expressed the importance of emerging markets to their companies’ long-term growth stories. If nothing else, that validates the investment thesis behind EATX.
Courtesy of Benzinga
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