6 ETFs For The Summer Olympics (XLP, EWU, XLI)
This summer, London will become the first city ever to have hosted three Olympic Games. While traders may be watching the action, they may be more interested in how they can trade around the event.
More than being a sporting spectacle of epic proportions, the Olympics are a money-maker. A rather large one at that and some of the biggest names in business, both foreign and domestic, shell out millions of dollars to have their names and products intimately tied to this global sporting event.
Purists may think it is sad that Olympics is now nearly as corporate as NASCAR, but that does create some opportunities for ETF investors. Consider the following funds as legitimate plays on the 2012 Summer Olympics.
Consumer Staples Select Sector SPDR (NYSE: XLP) Not only is the Consumer Staples Select Sector SPDR an ideal ETF with which to ride out market volatility, it is also chock full of major Olympics sponsors. XLP, the largest consumer staples ETF, is also the cheapest with an expense ratio of 0.18%.
Worldwide Olympics sponsors include Dow components Procter & Gamble (NYSE: PG) and Coca-Cola (NYSE: KO), two stocks that combine for over 25% of XLP's weight. Kraft's (NYSE: KFT) Cadbury unit is a 2012 Olympics supporter. That stock is XLP's seventh-largest holding with an allocation of 4.63%.
SPDR S&P International Energy Sector ETF (NYSE: IPW) The SPDR S&P International Energy Sector ETF makes the Olympics ETF list for one reason: The fund's 10.43% allocation to BP (NYSE: BP). Europe's second-largest oil company has been waging a public relations offensive for almost two years following the Gulf of Mexico oil spill in an effort to restore its battered image. With the Olympics on BP's home turf, the event marks one more opportunity for the company to regain some lost brand value and try to convince folks the company is not as evil as some would like to believe. BP is IPW's largest holding.
iShares MSCI United Kingdom Index Fund (NYSE: EWU) The iShares MSCI United Kingdom Index Fund is the largest ETF devoted exclusively to the host nation, warranting the fund's inclusion on this list. Several EWU components including BP, Rio Tinto (NYSE: RIO) and Lloyds Banking Group (NYSE: LYG) are Olympics sponsors.
The temporary economic benefit a major international sporting event provides to the host nation could not come at a better time for the U.K. and EWU. Amid a U.K. recession and Europe's worsening sovereign debt crisis, EWU has plunged 8% in the past month. The newly minted iShares MSCI United Kingdom Small Cap Index Fund (BATS: EWUS) also merits consideration as an Olympics ETF play.
iShares Dow Jones U.S. Financial Services Index Fund (NYSE: IYG) For those that dare dance with financials at the moment, the iShares Dow Jones U.S. Financial Services Index Fund is a credible 2012 Olympics. Still two months removed from the start of the games, Citigroup (NYSE: C), IYG's third-largest holding, has been running plenty of commercials with Olympics tie-ins. In addition, Visa (NYSE: V), IYG's fifth-largest holding, is a worldwide Olympics partner. Those two stocks combine for over 11% of IYG's weight.
Industrial Select Sector SPDR (NYSE: XLI) Clearly more a play on a potential rebound in U.S. stocks, the highly cyclical, economically sensitive Industrial Select Sector SPDR pops up on the Olympics ETF list because General Electric (NYSE: GE) and United Parcel Service (NYSE: UPS) are major 2012 Olympics sponsors. Those stocks are XLI's two largest holdings, combining for over 17% of the fund's weight.
iShares MSCI Germany Index Fund (NYSE: EWG) Time to give the ETF that tracks the Euro Zone's largest economy its due as a small Olympics play. Adidas and BMW are London 2012 Olympics partners. Those two highly visible German brands account of just over 5% o EWG's weight.
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