Even though strong second-quarter corporate earnings reports have been helping the major stock market indexes hover near their all-time highs, rising inflation and a resurgence of COVID-19 cases continue to worry investors.
According to the Labor Department data, the consumer price index (CPI) rose 5.4% in July, in line with June’s figure and representing the largest jump since August 2008. Furthermore, the International Monetary Fund (IMF) has warned that inflation could be persistent. But while high inflation poses a major threat for some industries, several industries are less susceptible to its consequences.
Therefore, we think it could be wise to invest in quality ETFs Energy Select Sector SPDR Fund (XLE), VanEck Vectors Gold Miners ETF (GDX), and Consumer Staples Select Sector SPDR Fund (XLP). They are less susceptible to the consequences of high inflation.
Energy Select Sector SPDR Fund (XLE)
Managed by the SSGA Funds Management, Inc., XLE invests in companies that operate across energy sectors. It also invests in the growth and value stocks of companies across market capitalization levels. In addition, it seeks to track the performance of the Energy Select Sector Index and the S&P 500 Index.
With $22.15 billion in AUM, XLE’s top holding is Exxon Mobil Corporation (XOM), which has a 23.55% weighting in the fund, followed by Chevron Corporation (CVX) at 21.62% and ConocoPhillips (COP) at 4.68%. It has a 0.12% expense ratio of 0.12%, which is lower than the 0.47% category average.
XLE pays a $2.11 annual dividend, which yields 4.40% at the fund’s prevailing share price. The ETF’s average four-year dividend yield stands at 5.34%. XLE has gained 26.4% in price over the past year and 31.6% over the past nine months.
XLE’s POWR Ratings are consistent with its growth outlook. It has a B grade for Peer. Get XLE’s Buy & Hold and Trade rating here.
XLE is ranked #8 of 44 ETFs in the Energy Equities ETFs group.
VanEck Vectors Gold Miners ETF (GDX)
GDX offers investors exposure to some of the largest gold mining companies in the world, and typically invests at least 80% of its assets in the common stocks and depositary receipts of companies in the gold mining industry. In addition, it seeks to track the performance of the NYSE Arca Gold Miners Index by using a full replication technique.
The fund has $13.83 billion in AUM. Its top holdings include Newmont Corporation (NEM), with a 14.97% weighting, Barrick Gold Corporation (GOLD) at 11.40%, and Franco-Nevada Corporation (FNV) with 9.31%. The fund’s 0.52% expense ratio compares to the 0.46% category average.
GDX pays a $0.19 annual dividend, which yields 0.60% at the fund’s prevailing share price. The ETF’s average four-year dividend yield stands at 0.57%.
Click here to access GDX’s POWR ratings for Buy & Hold, Trade, and Peer Grade. In addition, GDX is ranked #17 of 39 ETFs in the Precious Metals ETFs group.
Consumer Staples Select Sector SPDR Fund (XLP)
XLP is an exchange-traded fund launched by State Street Global Advisors, Inc. The fund invests in companies that operate across the consumer staples sector. It seeks to track the Consumer Staples Select Sector Index and the S&P 500 Index's performance by using a full replication technique.
XLP has $13.15 billion in AUM. Its top holdings include Procter & Gamble Company (PG) with a 16.01% weighting in the fund, Coca-Cola Company (KO) at 10.09% and PepsiCo, Inc. (PEP) with 9.87%. The fund’s 0.12% expense ratio is lower than the 0.38% category average.
The fund pays a $1.74 annual dividend, which yields 2.42% at the prevailing share price. Its average four-year dividend yield stands at 2.69%. The fund’s shares have gained 11.2% over the past year and generated 9.6% returns over the past six months.
XLP’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to Strong Buy in our proprietary rating system. It also has an A grade for Trade, Buy & Hold, and Peer.
XLP is ranked #2 of 48 ETFs in the Consumer-Focused ETFs group. Get all XLP’s grades here.
XLE shares were trading at $45.41 per share on Thursday morning, down $1.60 (-3.40%). Year-to-date, XLE has gained 22.32%, versus a 18.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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