Tag Archives: services

Retail ETFs In Focus This Holiday Season

As a pioneer in retail business, the U.S. provides ample growth opportunities for all types of retail companies. From growth perspective, retail ranks among the dominant U.S. industries and employs an enormous workforce. Retail sales represent approximately 30% of consumer spending, which itself accounts for more than two-thirds of the economy. The U.S. economy is on the growth path driven by lower oil prices and an improved job market that is counteracted by certain spillover effects from the global economy. However, this is not likely to come in the way of U.S. economic growth and the labor market boom. The Federal Reserve chairwoman Janet Yellen and the president of the New York Fed William Dudley recently expressed the possibilities of a U.S. rate hike in December, the first since the 2007-09 economic crisis and recession. The key basis for the hike will be a fall in unemployment rate and the return of inflation to the Central Bank’s 2% target over the medium term. From the economic standpoint, we see a gradual improvement in the labor market, as unemployment rates have declined to the lowest level since September 2008. According to the recent data from the Bureau of Labor Statistics, the unemployment rate for November has declined to 5%, same as in October. In November, 211,000 people were hired, reflecting improved employment prospects. Given a rebounding U.S. economy, the retail space is bubbling with optimism. A gradual recovery in the housing market and manufacturing sector, along with an improving labor market and lower gasoline prices, are favoring the economy and playing key roles in raising buyers’ confidence. We expect this positive sentiment to translate into higher consumer spending. The recent U.S. GDP data (second estimate) revealed that the economy grew at a rate of 2.1% in the third quarter, despite a strong dollar and overseas weakness, while consumer spending increased 3.2%. Though the pace of economic growth decelerated from the second quarter due to inventory correction, analysts are hopeful of a pickup in momentum in the final quarter that primarily constitutes the holiday season. The holiday season is the time when retailers are on their toes, flooding the markets with offers and promotions. Apart from price-matching policies, retailers will sweep buyers off their feet with early-hour store openings, huge discounts, promotional strategies and free shipping on online purchases. Since the season accounts for a sizeable chunk of yearly revenues and profits, retailers are gung ho to drive footfall. In this regard, retailers are efficiently allocating a major portion of their capital toward a multi-channel growth strategy focused on improving merchandise offerings, developing IT infrastructure to enhance web and mobile experiences of customers, giving their stores a facelift, developing fulfillment centers to enable speedy delivery, implementing an enterprise-wide inventory management system as well as enhancing their relationship with existing and new customers. ETFs present a low-cost and convenient way to get a diversified exposure to this sector. Below we have highlighted a few ETFs tracking the industry: SPDR S&P Retail (NYSEARCA: XRT ) Launched in June 2006, SPDR S&P Retail ( XRT ) is an ETF that seeks investment results corresponding to the S&P Retail Select Industry Index. This fund consists of 104 stocks, the top holdings being Wayfair Inc. (NYSE: W ), Pep Boys – Manny, Moe & Jack (NYSE: PBY ) and Abercrombie & Fitch Co. (NYSE: ANF ), representing asset allocation of 1.44%, 1.42% and 1.39%, respectively, as of December 11, 2015. The fund’s gross expense ratio is 0.35%, while its dividend yield is 1.12%. XRT has $637 million of assets under management (AUM) as of December 10, 2015. Market Vectors Retail ETF (NYSEARCA: RTH ) Initiated in December 2011, Market Vectors Retail ETF ( RTH ) tracks the performance of Market Vectors U.S. Listed Retail 25 Index. The fund comprises 26 stocks, the top holdings being Amazon.com Inc. (NASDAQ: AMZN ), Home Depot Inc. (NYSE: HD ) and Wal-Mart Stores Inc. (NYSE: WMT ), representing asset allocation of 15.25%, 8.73% and 6.39%, respectively, as of December 11, 2015. The fund’s net expense ratio is 0.35% and dividend yield is 0.37%. RTH has managed to attract $147.2 million in AUM till December 10, 2015. PowerShares Dynamic Retail (NYSEARCA: PMR ) PowerShares Dynamic Retail ( PMR ), launched in October 2005, follows the Dynamic Retail Intellidex Index and is made up of 30 stocks that are primarily engaged in operating general merchandise stores such as department stores, discount stores, warehouse clubs and superstores. The fund’s top holdings are The Kroger Co. (NYSE: KR ), Costco Wholesale Corporation (NASDAQ: COST ) and L Brands, Inc. (NYSE: LB ), reflecting asset allocation of 5.54%, 5.25% and 5.16%, respectively, as of December 11, 2015. The fund’s net expense ratio is 0.63%, while its dividend yield is 0.71%. PMR has managed to attract $22.4 million in AUM as of December 10, 2015. Original post .

4 Consumer ETFs To Ride On Holiday Optimism

Despite a weak start, the holiday season gained a firmer footing. This is especially true given the modest retail sales data for November and an improved consumer sentiment data for December. After months of sluggish spending, retail sales rose a modest 0.2% in November, representing the largest increase since July. Meanwhile, consumer confidence improved for the third consecutive month in December, with the preliminary University of Michigan sentiment index reading 91.8, up from 91.3 in November (read: 5 ETFs for Loads of Holiday Shopping Delight ). Solid job additions, slowly rising wages and cheap fuel are providing consumers extra money to spend on a wide range of products including electronics and appliances, clothing, sporting goods and books, and at restaurants and bars. In particular, spending increased 0.8% on clothing, 0.6% on electronics and appliances, and 0.8% at sporting goods and hobby stores. The strong trend is likely to continue for the rest of the holiday shopping season given an improving U.S. economy, a recovering housing market and stepped-up service activities. The National Retail Federation (NYSE: NRF ) expects total holiday sales in November and December (excluding autos, gas and restaurant) to grow at a solid pace of 3.7%. Though this marks a deceleration from last year’s growth rate of 4.1%, it is well above the 10-year average of 2.5%. Investors should note that online sales have superseded brick-and-mortar retail sales this year with mobile shopping playing a crucial role. Online sales are projected to grow 6-8% to $105 billion. ComScore expects online sales to jump 14% year over year to $70.06 billion for the full holiday season (November and December), outpacing the growth of brick-and-mortar retail sales. Given the holiday cheer, investors should cycle into the consumer discretionary space in order to obtain a nice momentum play. While looking at individual companies is certainly an option, a focus on the top-ranked consumer discretionary ETFs could be a less risky way to tap into the same broad trends (see: all the Consumer Discretionary ETFs here ). Top Ranked Consumer Discretionary ETF in Focus We have found a number of ETFs that have the top Zacks ETF Rank of 1 or ‘Strong Buy’ rating in this space and are thus expected to outperform in the months to come. While all the top-ranked ETFs are likely to outperform, the following four funds could be good choices. These funds have enjoyed a strong momentum and have potentially superior weighting methodologies that could allow them to continue leading the consumer space in the coming months. PowerShares DWA Consumer Cyclicals Momentum Portfolio ETF (NYSEARCA: PEZ ) This product tracks the DWA Consumer Cyclicals Technical Leaders Index. It holds 38 stocks having positive relative strength (momentum) characteristics, with none holding more than 5.4% of assets. This approach results in a large cap tilt at 43%, followed by 31% in mid caps and the rest in small. About 30% of the portfolio is dominated by specialty retail while hotel restaurants and leisure, textiles apparel and luxury goods, and airlines round off the next three positions with double-digit exposure each. The fund has managed $277.8 million in its asset base while trades in a lower average daily volume of 58,000 shares. It charges 60 bps in annual fees and added about 0.7% over the past one month. First Trust Consumer Discretionary AlphaDEX ETF (NYSEARCA: FXD ) This follows an AlphaDEX methodology and ranks stocks in the consumer space by various growth and value factors, eliminating the bottom ranked 25% of the stocks. This approach results in a basket of 129 stocks that are well spread out across each security, with none holding more than 1.7% of assets. About 49% of the portfolio is focused on mid cap securities with specialty retail being the top sector accounting for nearly one-fourth of the portfolio, closely followed by media (15.8%). FXD is one of the popular and liquid ETFs in the consumer discretionary space with AUM of $2.4 billion and average daily volume of 456,000 shares per day. It charges a higher 63 bps in annual fees and gained 0.9% over the past one month. Market Vectors Retail ETF (NYSEARCA: RTH ) This fund provides exposure to the retail segment of the broad consumer space by tracking the Market Vectors US Listed Retail 25 Index. It holds about 26 stocks in its basket with AUM of $147.6 million, while average daily volume is light at around 62,000 shares. Expense ratio came in at 0.35%. It is a large-cap centric fund that is heavily concentrated on the top firm Amazon.com (NASDAQ: AMZN ) with 15.3% share, closely followed by Home Depot (NYSE: HD ) at 8.9%. Sector wise, specialty retail occupies the top position with 29% share, followed by a double-digit allocation each to Internet & catalogue retail, hypermarkets, drug stores, and health care services. The product has added 5.3% over the past month. SPDR S&P Retail ETF (NYSEARCA: XRT ) This product tracks the S&P Retail Select Industry Index, holding 104 securities in its basket. It is widely spread across each component as none of these holds more than 1.47% of total assets. Small-cap stocks dominate about two-thirds of the portfolio while the rest have been split between the other two market cap levels. In terms of sector holdings, apparel retail takes the top spot with 22.3% share while specialty stores, automotive retail, and Internet retail also have a double-digit allocation each. XRT is the most popular and actively traded ETF in the retail space with AUM of about $948.4 million and average daily volume of more than 4.1 million shares. It charges 35 bps in annual fees and gained 2.5% in the past one month. Link to the original post on Zacks.com

The V20 Portfolio Week #10: Almost There

Summary The search for a hedge continues. Dex Media’s new deadline is Monday, but it could be extended again. With all major events now behind us, it should be smooth sailing ahead. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! The bears are back just before we wrap up the year. The V20 Portfolio claimed another victory over the S&P 500 this week, staying virtually flat (-0.4%) versus the index’s decline of 4% this week. With oil hitting historic lows recently, having broken the $40/bbl mark and now testing $35/bbl, there seems to be no end to this commodity slump. Update On Hedging Those of you that follow my weekly updates probably remembered that I was looking for an energy stock to offset the position in Spirit Airlines (NASDAQ: SAVE ). I still have not found any energy stock that would be worthwhile to include in the V20 portfolio, and it looks that I got lucky with this delay. I want to stress the word “luck” because I had every intention to find a good energy company, it’s just that I have been successful thus far. Had I taken a position then, it sure wouldn’t have been pretty. Given the current outlook for oil, has my objective changed? The answer is no. I remain committed to find an offsetting position for Spirit Airlines. Keep in mind that this is not limited to a long on energy stocks, it could also be a short on a less impressive airline, or even futures for a more direct hedge for fuel prices. The reason why I am more inclined to find a long position is simply the result of better risk/reward of a long position on an undervalued energy company. Ideally, the company would earn money during the current downturn, and will hence perform even better when oil rises. So in other words, I don’t want the value of this hedging position to completely offset any gains or losses that I make on Spirit Airlines. Outlook With Conn’s (NASDAQ: CONN ) earnings now behind us, we’ve officially wrapped up Q3 earnings. Going forward, Conn’s will continue to report monthly sales data. Through Q3 earnings, we already know that November sales were up 8% on a same store basis, so growth continues to be strong. Previously there were worries that tightening credit policies would impact sales, this is clear evidence that points to the contrary. There is also the curious case of Dex Media (NASDAQ: DXM ). As always, the stock fluctuated wildly during the week, and I expect this trend to continue going forward. However, because the stock is such a minute portion of the V20 Portfolio, any downside volatility will not significantly impact overall results at all. Even if equity holders lose everything post-restructuring, the V20 Portfolio will only decline by 0.7%. On the contrary, if the restructuring outcome is favorable to equity holders, then its value will skyrocket. As of right now, all stakeholders are still negotiating. Having extended the forbearance period once already, I wouldn’t be surprised if it is extended once again after the deadline passes on Monday. With major events now behind us, the V20 Portfolio is looking to have a strong finish in 2015. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.