Market Overview

A Disruptive Retail ETF

A Disruptive Retail ETF

A new breed of exchange traded funds offer investors exposure to the true source of future retail sales growth, that of course being online and e-commerce sales.

Among these ETFs is the ProShares Long Online/Short Stores ETF (NYSE: CLIX), which debuted in November. While some new generation focusing on online retailers do just that, CLIX goes a step further by offering investors a way to also profit from the decline of traditional brick-and-mortar retailers.

What Happened

CLIX “is the first ETF to provide investors opportunities arising from both the potential growth of online companies and the decline of bricks and mortar retailers. It tracks the new ProShares Long Online/Short Stores Index which combines a 100% long portfolio of on-line and non-traditional retailers with a 50% short position in bricks and mortar retailers,” according to ProShares.

The ProShares ETF features a 100-percent long position in online retailers and e-commerce purveyors coupled with a 50-percent short position in retail chains relying on the conventional physical store model.

“A potential advantage is that the long and short positions may offset one another, resulting in a lower net exposure to the direction of the market,” said the issuer.

Why It's Important

Price action suggests the CLIX strategy is working, which is impressive when considering the brick-and-mortar heavy SPDR S&P Retail ETF (NYSE: XRT), the largest retail ETF, is up 11.22 percent year-to-date. Despite XRT's impressive 2018 performance, CLIX is outperforming its conventional rival by a margin of more than 2-to-1.

CLIX can be considered a right place, right time ETF. Last year, 17 U.S. retailers filed for bankruptcy and there were thousands of store closures, according to ProShares data. Even with all those store closures, the U.S. still has significantly more physical retail space than in other major developed economies.

Top holdings in CLIX include familiar fare, such as Alibaba Group Holding Ltd. (NYSE: BABA), Inc. (NASDAQ: AMZN) and Netflix, Inc. (NASDAQ: NFLX).

What's Next

The future appears bright for CLIX, whether be by more brick-and-mortar closures, increased e-commerce activity or both.

“Based on current projections, e-commerce retailers are poised to continue along an upward growth trend across all retail categories for at least the next decade,” said ProShares. “By 2030, annual online purchases are projected to reach nearly one-quarter of all U.S. sales.”

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