Part of the latest round of stimulus checks sent to American households has been trickling down to retailers, including e-commerce players. Meanwhile, a further opening of global economies could likely see consumers shop at brick-and-mortar stores and online. Therefore, today we introduce two exchange-traded funds (ETFs) that could benefit from consumers splurging on a wide range of items.
1. SPDR S&P Retail ETF
Current Price: $86.77
52-Week Range: $26.29 - $99.24
Dividend Yield: 0.72%
Expense Ratio: 0.35% per year
According to the most recent monthly US Census Bureau data, US retail and food services sales "for the December 2020 through February 2021 period were up 6% (±0.5%) from the same period a year ago."
Furthermore, "personal income increased $1,954.7 billion (10%) in January, according to estimates released today by the Bureau of Economic Analysis, ... and personal consumption expenditures (PCE) increased $340.9 billion (2.4%)."
Put another way, as a new quarter approaches, consumer spending in the US looks quite robust. The SPDR® S&P Retail ETF (NYSE:XRT) is worth keeping on your shopping list as it invests in a range of retail businesses. The fund started trading in June 2006 and has around $660 million under management.
XRT, which tracks the returns of the S&P Retail Select Industry Index, currently has 102 holdings. The top 10 stocks comprise less than 12% of assets. Thus, price moves in no single company can significantly influence the ETF.
In terms of sub-sectors, Internet & Direct Marketing Retail businesses have the largest weighting, with 20.91%. Next in line are Automotive Retail (18.77%), Apparel Retail (18.09%), Specialty Stores (16.20%) and Food Retail (6.72%).
Among the leading stocks are national gas station and convenience store chain Murphy USA (NYSE:MUSA), automotive parts retailer AutoZone (NYSE:AZO), omni-channel retailer Target (NYSE:TGT), food retailer Sprouts Farmers Market (NASDAQ:SFM) and online auction and e-commerce platform eBay (NASDAQ:EBAY).
Year-to-date, XRT has climbed by 39% and hit an all-time high in January. Trailing P/E and P/B ratios stand at 17.52 and 3.60, respectively. In the case of further profit-taking in April, we'd look to invest in the fund between $75-$80. In the long run, we expect most of the names in the fund to stay resilient and grow revenues.
2. Amplify Online Retail ETF
Current Price: $121.35
52-week Range: $38.37 - $141.00
Dividend Yield: 0.64%
Expense Ratio: 0.65% per year
Recent metrics show, "The North American e-commerce market is worth just under $912 billion and is growing at a rate of 13% a year. The average North American e-shopper spends around $3,500 a year online and e-commerce sales already account for 14% of all retail sales."
In the pandemic days, online shopping has become even more important, not just stateside but also worldwide. According to Statista, "In 2019, retail e-commerce sales worldwide amounted to US$3.53 trillion and e-retail revenues are projected to grow to US$6.54 trillion in 2022.”
The Amplify Online Retail ETF (NASDAQ:IBUY) gives access to global businesses with 70% or more of revenue coming from sales online. The fund began trading in April 2016, and net assets stand at $1.6 billion.
IBUY, which has 58 holdings, tracks the returns of the EQM Online Retail Index. About 76% of the companies come from the US, followed by China, Germany, the U.K. and Israel. Around 35% of the fund is held in the top 10 stocks.
Several of the leading businesses in the ETF are online retailer Revolve (NYSE:RVLV), which focuses on Millennial and Generation Z consumers; online travel platform TripAdvisor (NASDAQ:TRIP); online discount commerce platform Groupon (NASDAQ:GRPN); ride-sharing platform Lyft (NASDAQ:LYFT); and media group Qurate Retail (NASDAQ:QRTEA), whose brands include QVC, HSN, Zulily and others.
Since the start of the year, the fund is up 3% and hit an all-time high in mid-February. However, over the past year, IBUY has returned 190%. Long-term investors may regard any further pullback toward $100 as an opportunity to go long the shares.