Time to Lace-Up ETFs with Footwear Exposure?
Shares of Nike (NYSE: NKE), the world's largest maker of athletic footwear, have slipped almost 7% in the past month, but S&P Capital IQ has a bullish outlook on the footwear sub-industry for the next 12 months.
In a recent research note, S&P Capital IQ gave Nike a four-star rating, and highlighted two ETFs that could benefit from bullishness among manufacturers of athletic footwear. The Vanguard Small Cap ETF (NYSE: VB) received a Marketweight rating while the Focus Morningstar Consumer Cyclical ETF (NYSE: FCL) garnered an Overweight rating. VB is up 4.1% year-to-date while FCL has jumped 8.6%.
"Despite our expectation of a slow and uneven economic recovery, we think footwear companies are poised to achieve double-digit sales growth in 2012," S&P said in the note. "We see consumers seeking out newness in fashion footwear and technical innovation in athletic and outdoor footwear, and paying up for premium products. We also believe demand for athletic and outdoor footwear is being driven by the secular trend of people working out, running, hiking, and playing sports as part of an active lifestyle."
Ahead of the Summer Olympics in London, athletic footwear makers and retailers could also be worth a look because major international sporting events often serve as ideal times for Nike and its rivals to roll out new products before a global audience.
"Expected new product launches and investments in brand marketing during the 2012 Summer Olympic Games in London could drive incremental sales of athletic styles, in our view. In addition, we look for sales of related apparel and accessories, and international expansion, particularly in emerging markets like China and South America, to benefit many footwear companies," S&P said.
FCL debuted in late March 2011 as a rival to the Consumer Discretionary Select Sector SPDR (NYSE: XLY), and offers a 2.63% weight to Nike as well as smaller allocations to athletic apparel and footwear retailers such as Foot Locker (NYSE: FL) and Dick's Sporting Goods (NYSE: DKS). XLY features a 2.84% weight to Nike, and charges an expense ratio of 0.18% compared to FCL's fees of 0.19%.
S&P has a three-star rating on Foot Locker, and in terms of VB, is the largest holding of the ETF's 1,735 stocks. Foot Locker accounts for 0.3% of the ETF's weight.
"We note that VB has the largest market cap ($3.9 billion) and lowest gross expense ratio of five ETFs that have Footlocker as a top-10 holding and an S&P Capital IQ Marketweight ranking," S&P said in the note.
VB was the third-largest small-cap ETF at the end of May behind the iShares Russell 2000 Index Fund (NYSE: IWM) and the iShares S&P SmallCap 600 Index Fund (NYSE: IJR), according to ETF Industry Association data.
For more on ETFs with ties to the Olympics, click here.
Latest Ratings for NKE
|May 2015||Jefferies||Initiates Coverage on||Buy|
|Apr 2015||Piper Jaffray||Upgrades||Neutral||Overweight|
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