3 food and beverage ETFs for hungry investors 

First Trust Nasdaq Food & Beverage ETF (FTXG)

FTXG tracks the proprietary Nasdaq US Smart Food & Beverage Index, which screens its holdings based on a multi-factor weighting methodology. First, the index selects the 30 most liquid U.S. F&B stocks and ranks them based on volatility (trailing 12-month price fluctuation), value (cash flow to price) and growth (three, six, nine, and 12-month average price appreciation).

A score is then assigned to each stock based on how it ranked for each of the three aforementioned factors. Then, the stocks are weighted according to their scores, with caps to prevent single stocks from dominating the ETF. FTXG is rebalanced quarterly and reconstituted annually. Even though it follows an index, FTXG comes with a higher expense ratio of 0.60%. 

With dividends reinvested, FTXG is actually up 10.22% year-to-date as of December 20th, strongly outperforming the S&P 500 index and its broader, passively managed competitor, the Consumer Staples Select Sector SPDR ETF (XLP) which returned 1.95%. My theory is that F&B companies were better poised to deal with inflation than other consumer staples industries like tobacco or home products. 

Invesco Dynamic Food & Beverage ETF (PBJ)

I love creative ETF ticker names, and PBJ is a prime example. The ticker tells you exactly what this ETF is about – investing in F&B companies. Like FTXG, PBJ follows an index, but takes a quasi-active, factor-based management approach. The ETF will only hold 30 U.S. F&B companies at a time, which are selected based on their price momentum, earnings momentum, quality, and value. 

In terms of performance, PBJ has returned 8.27% year-to-date with dividends reinvested, virtually the same as FTXG. However, since FTXG's inception in 2017, both ETFs have performed virtually identically, returning 7.51% versus 7.52% for FTXG and PBJ respectively. PBJ did eke out lower volatility with a standard deviation of 14.32% versus 15.33%, but that difference is so small that it could be noise. 

Looking at PBJ's top holdings, we see familiar names like General Mills (GIS), Archer-Daniels-Midland (ADM), Campbell Soup (CPB), PepsiCo (PEP), and Keurig Dr. Pepper (KDP). There are differences in their weightings, and PBJ actually excludes Coca-Cola (KO) for some reason, but overall PBJ could be a great tax-loss harvesting partner for FTXG given their similar historical performance. 

Direxion Breakfast Commodities Strategy ETF (BRKY)

Commodities ETFs either run the gamut from broadly diversified baskets of different underlying commodities or concentrated plays on a certain one. An ETF that meets somewhere in the middle is BRKY, which tracks the S&P GSCI Dynamic Roll Breakfast (OJ 5% Capped) Index. As the name suggests, this ETF tracks the performance of breakfast-related commodities. 

What investors eat for breakfast depends on where they live, and this ETF has a decidedly American focus. Currently, BRKY only holds futures contracts for corn, coffee, lean hogs, orange juice frozen concentrate, sugar, and wheat. Each commodity is weighted in BRKY by its global market concentration, with the exception of orange juice which is capped at 5%. 

Currently, most of BRKY's portfolio is held in corn futures (40.14%), followed by wheat (26.76%), lean hogs (10.87%), sugar (9.96%), coffee (6.47%), and orange juice (5.79%). I think BRKY is best used as a tactical trading tool given that most commodity futures ETFs make for poor long-term holds due to contango. The ETF currently costs an expense ratio of 0.70%. 

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.