Create Your Own Highly Defensive ETF

The accompanying table [click to enlarge] contains 35 companies included in the ETF Innovators Highly Defensive PerformIdex which are based in the U.S., Canada, and Europe with market caps over $10B that are the leaders by market cap in their defensive industry groups. The index includes 23 consumer staples and healthcare companies, with the remaining 12 companies chosen from a variety of other defensive industry groups.

(A) Mass Merchant Discount Retailer (1): Wal-Mart (WMT)

(B) Consumer Staples (11): Coca-Cola (KO), Colgate-Palmolive (CL), Diageo (DEO), General Mills (GIS), Groupe Danone (GDNNY), Kraft (KFT), Nestle (NSRGY), PepsiCo (PEP), Philip Morris International (PM), Procter & Gamble (PG), Unilever (UN)

(C) Telecom Services (4): AT&T (T), Telefonica (TEF), Verizon (VZ), Vodafone (VOD)

(D) Cable Television & Internet Access Providers (1): Comcast (CMCSA)

(E) Utilities (2): Exelon (EXC), Southern Company (SO)

(F) Fast Food Restaurants (1): McDonald's (MCD)

(G) Commodities (2): Gold Mining (1) + Agri-Biotech (1): Barrick Gold (ABX), Monsanto (MON)

(H) Healthcare (12) – Top 7 by Market Cap, Biotech (4), Generic Drugs (1): Abbott Labs (ABT), Genzyme (GENZ), Celgene (CELG), Genentech (DNA), Gilead Sciences (GILD), GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), Novartis (NVS), Pfizer (PFE), Roche (RHHBY), Teva Pharma (TEVA)

(I) Aerospace (Non-Commercial) & Defense (1): Lockheed Martin (LMT)

Over the past year, the index has outpaced the overall market and all of its benchmark ETFs on a total return basis with a loss of 11.7%, including losses of 25% for the Sabrient/Claymore Defensive ETF (DEF), 14% for the Consumer Staples Sector SPDR (XLP), 23.7% for the Healthcare Sector SPDR (XLV), 24.8% for the Utilities Sector SPDR (XLU), 37.5% for the Dow Jones Global Titans (DGT), 33.7% for the iShares Dow Jones Select Dividend (DVY), and 34.7% for the S&P 500 SPDR (SPY).

This equally-weighted, defensive index is only 58% as volatile as the overall market with an average market cap of about $75B and an average dividend yield of 3.2%, which is slightly above the 3% average yield for SPY. The goal of this index is to provide a combination of companies with U.S.-listed stocks to create a composite blend of traditional safe havens represented by the benchmark ETFs outlined above, rather than choosing a single sector (i.e. healthcare or consumer staples) or a specific strategy (i.e. high dividend yields or Dogs of the Dow).