Market Overview

3 Retail ETFs To Consider Heading Into Year-End Sales

3 Retail ETFs To Consider Heading Into Year-End Sales

With the back-to-school shopping saga underway and the holiday season around the corner, retailers are preparing for their most important time of the year. Investors should try to position themselves to take advantage of the seasonal surge in consumer spending.

Here are three retail ETFs whose holdings could be positively affected by the expected rise in consumer spending over the next five months.

PowerShares Dynamic Retail Portfolio ETF (NYSE: PMR)

PMR has a portfolio of 29 retailers almost exactly split between consumer discretionary and consumer staples.

The top four holdings are Kroger (NYSE: KR), Costco Wholesale (NASDAQ: COST) and O’Reilly Automotive (NASDAQ: ORLY) at 5.4 percent each, and Macy’s (NYSE: M) at 5.2 percent. The remaining holdings are well distributed and range from 5.2 percent to 2.1 percent of the fund.

Over the last two years PMR is up nearly 35 percent, but is slightly lagging the S&P 500 this year with a gain of 6 percent. One concern is that PMR boasts an expense ratio of 0.63 percent, almost double that of its competitors.

Related Link: Food ETF Hits High On Merger News


XRT is the most diverse ETF of the three mentioned with 103 different holdings.

The top ten stocks combined make up less than 12 percent of the entire portfolio; the top three are SuperValu (NYSE: SVU), Family Dollar Stores (NYSE: FDO), and PetSmart (NASDAQ: PETM), each making up 1.2 percent.

XRT has outperformed PMR with a gain of just under 45 percent over the last two years and is up 11 percent year to date. PMR has an expense ratio of 0.35 percent and is a solid option for anyone looking for a diverse fund that will efficiently reflect the overall performance of the retail sector.

Market Vectors Retail ETF (NYSE: RTH)

RTH is a slightly less diverse fund than the previous two; its top two holdings, Wal-Mart (NYSE: WMT) and Amazon (NASDAQ: AMZN), make up just under 20 percent of the total portfolio. Thus its success is largely dependent on the success of those two stocks.

Despite its more concentrated holdings, RTH has performed better than the other two ETFs this year, with a gain of 17 percent; over the last two years RTH is up 40 percent. RTH also has an expense ratio of 0.35 percent.

All three retail ETFs are solid options for investors looking to take advantage of an anticipated boost in retail spending over last year. Many experts see pent-up consumer demand and are looking for holiday sales to beat the 3 percent gains the sector experienced in the last two years. That would be exactly what the retailers are asking from Santa this holiday season.


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