ETF for the “Fast Food” Investor?
16 January 2008 at 1:46 pm by Gary Gordon
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.)
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