Investors. Are You Ready For A Beer ETF?

on 09/02/11 at 10:13 am

Booze News

The emergence of ETFs have given investors new, low-cost tools to gain exposure to markets that would otherwise be difficult to reach. Numerous ETPs have successfully hypertargeted unique corners of the market, such as emerging market debt, rare earth metals, and small cap gold mining funds. As investors grow more comfortable with diversifying their assets through a single ticker, the ETF industry continues to expand, to meet the rising demand of investors who have grown tired of the often inferior performance and high-costs associated with mutual funds. And still, with a rapidly growing industry, there are a wealth of intriguing market segments that ETFs have yet to capitalize on, one of them being beer brewers [see also Who Else Wants A Railroad ETF?].

From an investment standpoint, beer companies present a strong opportunity. While some of these firms may have exited their high growth stage, they manufacture a product that is unlike any other when it comes to market behavior. Many are quick to call alcohol a ‘recession proof’ product; while this may be an exaggeration, there is certainly some truth to that statement. In times of economic despair, though these companies may suffer losses, they typically perform better than other blue chip equities. In our most recent recession, for example, alcohol sales did take a major hit, but this must also be taken into context; these have been the worst economic conditions since the Great Depression. Looking further back, during the 2001 recession, Reuters found that alcohol consumption had actually increased.

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