The ETF PHG (Lyxor) replicates the Stoxx Europe 600 Consumer Discretionary Index (SXQR) which is composed of the main European stocks of this sector.
This index is fairly concentrated since it has only 36 holdings. By geography, the index is predominantly English with a weighting of 56% for the United Kingdom, 17% for France and 10% for Germany. The ETF PHG bears costs of 0.3% which are in the market average with AUM of € 27.8M.
The replication method is indirect (via a swap) and the dividends are capitalized.
The consumer goods index is composed of large caps, ranging from 40 to 100 bn€ for the top 10 companies, belonging to several sectors: manufacturers of luxury products (Richemont, LVMH) but also hygiene and beauty products (Loreal, Reckitt, Henkel ..), while the first capitalization is a cigarette manufacturer (BAT). The main companies that make up this index have very strong brands, which allow them to benefit from growth that is often superior to world GDP, with strong associated margins (ROP> 20%). Moreover, these companies are not very cyclical, which gives them a defensive aspect during crises. The risk / return ratio is therefore very interesting on this sector.
The players in the sector often have fairly high exposure to emerging countries, particularly in Asia where growth is occurring, and are therefore likely to be impacted by fears of an economic slowdown in the region or by a fall of the major Asian currencies, the Yen and the Renminbi. It will be noted that more than half of the index is composed of English securities, which implies a strong exposure to the sterling. However, this exposure is actually rather limited since the revenues of these companies are above all realized on a world scale, and very little British.
The index's performance has been 10.5% since the beginning of the year, following a lateral consolidation (+ 3% in 2016), which followed a 23% increase in 2015. It is the 8th year Consecutive increase since 2009.
After an increase of nearly 20% in the first half, PHG has corrected like a large part of the European market, and released about half of its gains since the end of May. However, the performance of PHG is currently almost twice that of the Stoxx600NR. The good performance was driven by strong growth in stocks such as Unilever (+ 31%), Adidas (+ 27%) and LVMH (+ 23%), while the 1st capitalization, BAT, rose by only 8.6%. This good performance is largely due to the strong results of the H1 2017, due to a good Chinese consumption in particular, a good capacity to increase prices, development of online platforms, and good overall prospects. Valuations are demanding (more than 20x estimated profits) for an increase in profits of around 10% in 2017.
