Looking for Strong Cyclicals? A Pair of Invesco ETFs to Consider

When looking to allocate funds to the consumer goods or services sectors, one pair of funds worth considering is the Invesco S&P SmallCap Consumer Discretionary ETF (PSCD) and the Invesco S&P SmallCap Consumer Staples ETF (PSCC).

Source: Looking for Strong Cyclicals? A Pair of Invesco ETFs to Consider

“My advice for long-term investors: establish full allocations in both sectors and maintain them both throughout market cycles,” wrote Michael Fitzsimmons in Seeking Alpha. “With the possible exception of the dividend growth crowd, many investors these days are likely over-weight technology and growth stocks – companies that are more typically representative of the Consumer Discretionary sector.”

“That being the case, it is important for those investors to consider allocating some capital to the less glamorous (some would even say boring) – yet still important – consumer staples sector,” the article added.

PSCD seeks to track the investment results of the S&P SmallCap 600® Capped Consumer Discretionary Index. The fund generally will invest at least 90% of its total assets in the securities of small-capitalization U.S. consumer discretionary companies that comprise the underlying index.

These companies are principally engaged in the businesses of providing consumer goods and services that are cyclical in nature, including, but not limited to, household durables, leisure products and services, apparel and luxury goods, computers and electronics, automobiles, etc.

“Given the sector-specific focus of PSCD, this fund might have tremendous appeal to those building a long-term, buy-and-hold portfolio; many PSCD holdings are already included in small cap equity funds,” an ETF Database analysis suggested.

A Consumer Staples Option

PSCC seeks to track the investment results of the S&P SmallCap 600® Capped Consumer Staples Index. The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index.

Strictly in accordance with its guidelines and mandated procedures, S&P Dow Jones Indices compiles, maintains, and calculates the index, which is designed to measure the performance of securities of small-capitalization U.S. companies in the consumer staples sector, as defined by the Global Industry Classification Standard.

“Since many of the components of PSCC are found in small cap ETFs and other broad-based equity funds, there might not be much use for this ETF within a long-term, buy-and-hold portfolio,” an ETF Database analysis noted. “PSCC can, however, be useful as a means of implementing a tactical tilt towards the consumer staples sector; this fund can be a nice tool for implementing a sector rotation strategy.”