Market Overview

A New, Possibly Better Way To Play Consumer Discretionary Stocks

A New, Possibly Better Way To Play Consumer Discretionary Stocks

Sometimes what looks like a niche exchange-traded fund when it debuts reveals itself to be a credible concept. That might just be what is happening with the Amplify Online Retail ETF (NASDAQ: IBUY), which is just five months old.

In reality, the concept of an ETF dedicated to online retail and e-commerce companies is not at all far flung. Given the domestic and international growth of e-commerce, it can be argued that an ETF like IBUY was a long time coming if not overdue. After all,, Inc. (NASDAQ: AMZN) is now the fifth-largest company in the S&P 500, and for years, investors have heard about how Amazon is going to put various brick-and-mortar retailers out of business, something Amazon has already done on multiple occasions.

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Amazon accounts for nearly 1.7 percent of IBUY's weight, roughly the same weight the company commands in the S&P 500. That light weight to Amazon underscores IBUY's impressive run since coming to market in late April. Since then, the Amplify Online Retail ETF is up 9.6 percent, while the Vanguard Consumer Discretionary ETF (NYSE: VCR) is down nearly 1 percent.

Index, Holdings

IBUY follows the EQM Online Retail Index (IBUYXT). The EQM Online Retail Index (IBUYXT) is a rules-based benchmark “comprised of a diverse group of companies that generate at least 70 percent of their revenue from online and virtual retail sales,” according to a statement issued by Amplify.

“When we look at the top holdings within IBUY, there are several “newly public” companies among them, demonstrating the renewed boom in recent years in online retail: 1) ETSY 2) GRUB 3) SALE 4) NILE 5) EBAY. AMZN, as a matter of fact, is represented in the index as well, but only carries a 1.61 percent weighting currently. Thus IBUY remains a diversified online retail play that’s much more heavily weighted to smaller companies than investors may imagine at first glance,” said StreetOne Financial Vice President Paul Weisbruch in a note out Monday.

IBUY is currently home to 49 stocks. At the end of the second quarter, about a third of the ETF's holdings were large caps and 40 percent were small caps. The ETF is not exclusively dedicated to U.S. stocks as China, Japan and the U.K. combine for about a quarter of IBUY's geographic weight.

IBUY “saw a relative volume swell last Friday with nearly 10,000 shares changing hands. IBUY is also hovering near all-time product highs,” added Weisbruch.

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