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6 Consumer Discretionary ETFs Riding on Holiday Fervor

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The consumer discretionary segment is sizzling on holiday fervor. The holiday season has turned into an e-commerce bonanza this year as a large number of consumers are avoiding gatherings and maintaining social distancing to contain the pandemic.

The National Retail Federation (“NRF”) expects holiday sales to grow 3.6-5.2% in November and December to $755.3-$766.7 billion. This is higher than last year’s growth of 4% and the five-year average of 3.5%. Of these, online and other non-store sales are likely to increase 20-30% to $202.5-$218.4 billion, up from $168.7 billion last year. eMarketer forecasts holiday e-commerce sales to surge 35.8% year over year to $190.47 billion offsetting in-store sales decline of 4.7%. Meanwhile, Adobe sees holiday online sales to grow 30% from the last year to $184 billion (read: Holiday Shopping Shifts to E-Commerce: ETFs to Tap).

Added to the strength is the development surrounding COVID-19 vaccines after encouraging study results from AstraZeneca (AZN - Free Report) , Moderna (MRNA - Free Report) and Pfizer (PFE - Free Report) and their availability. Britain began vaccination with Pfizer’s product last week while Canada plans to roll out vaccination this week after being approved. The Food and Drug Administration also authorized Pfizer's vaccine for emergency use in people aged 16 and older. This has sparked off bullishness, spurring expectations for faster-than-expected economic recovery bets, which in turn would lead to higher spending and consumer confidence.

In fact, U.S. consumers grew more confident in the economy in early December on the prospects of a vaccine. A gauge of U.S. consumer sentiment, as measured by the University of Michigan, climbed to second-highest level since March to 81.4 from 76.9 in the prior month.

That said, consumer discretionary ETFs have surged over the past month. While these might not be the biggest winners of the broad stock market rally, they are surging on holiday optimism and will likely to do for the rest of the year:

Roundhill Sports Betting & iGaming ETF (BETZ - Free Report) – Up 12.7%

This ETF debuted in early June and has attracted $162.7 million in AUM. It is designed to offer retail and institutional investors global exposure to sports betting and iGaming industries by tracking the Roundhill Sports Betting & iGaming Index. Sportsbook comprises 42.7% share while technology, iGaming and casinos round off the next three spots with double-digit exposure each. The fund holds 38 stocks in its basket and charges 75 bps in annual fees. It trades in an average daily volume of 184,000 shares.

SPDR S&P Retail ETF (XRT - Free Report) – Up 12.2%

With AUM of $581.2 million, this product targets the broad retail sector by tracking the S&P Retail Select Industry Index. It holds 84 securities in its basket with key holdings in Internet & direct marketing retail, apparel retail, automotive retail, and specialty stores. The fund charges 35 bps in annual fees and trades in an average daily volume of around 3.3 million shares. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

ProShares Online Retail ETF (ONLN - Free Report) – Up 11.8%

This ETF focuses on global retailers that derive significant revenues from online sales. It follows the ProShares Online Retail Index, holding 26 stocks in its basket. While U.S. firms dominate the portfolio with three-fourth share, Chinese firms account for 21% share. The product has amassed $809.1 million in its asset base while trading in a good volume of around 257,000 shares a day on average. It charges 58 bps in annual fees from investors.

Amplify Online Retail ETF (IBUY - Free Report) – Up 11.7%

This ETF has attracted $1.2 billion to its asset base and offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 58 stocks and charges 65 bps in annual fees. It trades in an average daily volume of 217,000 shares (read: 8 ETFs That Have Gained More Than 100% in 2020).

Invesco DWA Consumer Cyclicals Momentum ETF (PEZ - Free Report) – Up 11.5%

This fund offers exposure to the broad consumer discretionary segment with stocks having positive relative strength (momentum) characteristics. It follows the DWA Consumer Cyclicals Technical Leaders Index, holding 41 stocks. About 39.3% of the portfolio is dominated by specialty retail while hotels, restaurants & leisure account for 22.2% share. The fund has managed $44.7 million in its asset base while trading in a lower average daily volume of 9,000 shares. It charges 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Invesco S&P SmallCap Consumer Discretionary ETF (PSCD - Free Report) – Up 10.3%

The fund follows the S&P SmallCap 600 Capped Consumer Discretionary Index and holds 92 securities in its basket. Specialty retail takes the largest share at 24.9% while household durables, textile, apparel & luxury goods, auto components, and hotels, restaurants and leisure accounts for double-digit exposure each. The product has attracted $24.7 million in AUM while seeing a paltry volume of 4,000 shares per day. The ETF charges 29 bps in annual fees and has a Zacks ETF Rank #3 with a High risk outlook.

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