Amazon, with a market cap above $800 billion, is well positioned to cash in on the next wave of online retail. Amazon acquired Whole Foods Market last year which is in line with its aim to expand its fresh food offerings. But, the e-commerce giant’s outsized gains haven’t hampered traditional retailers as well. They are building omnichannel presence and are gaining customers (read more: Amazon's Retail & Budding Web Services Make It a Real Deal).
Retailers, in fact, are on a hiring spree. They have led the way in hiring by increasing employment by 31,000 last month. This shows that they are on an expansion mode and their businesses are churning out huge profits. And why not? Sales at U.S. retailers rose in broad fashion in April as fatter after-tax pay checks helped compensate the uptick in fuel cost. Per the Commerce Department, sales increased 0.3% in April, matching the median forecast, after a 0.8% rise in the prior month.
As traditional retailers are again co-existing with Internet retailers, retail stocks are on a rally mode. So far this year, the SPDR S&P Retail is up 3.5% versus a meager 0.8% gain of the S&P 500. Their margin erosion is moderating, comparable sales are rising and profit margins are stabilizing.
As Retailers Roar High, Buy These 2 Mutual Funds
Taking retailers’ bullish trend into consideration, it will be prudent to invest in mutual funds with a major holding in such companies. These funds also possess a Zacks Mutual Fund Rank #2 (Buy), have positive 1-year and 5-year annualized returns, minimum initial investments within $5000 and have no entry and exit loads.
But, why choose mutual funds over stocks? This is because funds reduce transaction costs for investors. Funds also diversify their portfolio without the numerous commission charges that stocks need to bear (read: The Advantages Of Mutual Funds).
Fidelity Select Consumer Discretionary Portfolio (FSCPX - Free Report) seeks capital appreciation. FSCPX normally invests a large portion of its assets in common stocks of companies principally engaged in the manufacture and distribution of goods and services to consumers both domestically and internationally.
FSCPX’s 1-year and 5-year annualized returns are 16.8% and 13.7%, respectively. FSCPX has significant exposure to companies like Amazon, Home Depot and Dollar Tree, to name a few.
Rydex Retailing Investor (RYRIX - Free Report) invests substantially all of its assets in equity securities of retailing companies that are traded in the United States. RYRIX seeks capital appreciation by investing in companies engaged in merchandising finished goods and services, including department stores, restaurant franchises, mail order operations and other companies involved in selling products to consumers.
RYRIX’s 1-year and 5-year annualized returns are 11.1% and 8.5%, respectively. RYRIX has significant exposure to companies like Amazon, Home Depot and Wall Mart, to name a few.
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