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ETFs to Gain on Amazon's Rally Amid Coronavirus Crisis
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The United States continues to top the chart, with the highest number of coronavirus-infected cases. It recorded in excess of 671,425 cases with a death toll of around 33,286. In order to contain the spread of the virus, governments across the globe are shutting down economic activities and imposing social distancing measures.
In the current scenario, consumers are opting for online retailers to purchase food items and goods to minimize human contact. Backed by surging stay-at-home mandates, one of the largest e-commerce providers, Amazon (AMZN - Free Report) has been seeing a flurry of new home delivery orders.
Amazon has already gained 30.3% in 2020. It has increased 23.5% so far in the current month (as of Apr 16). Doug Anmuth, a J.P. Morgan analyst, has said that Amazon remains his "top idea" (per a MarketWatch article). He has also said that, "beyond the near-term benefits, we believe that [Amazon] will gain incremental share of both total retail and online retail in the downturn, as was the case in 2008-2009", according to the same MarketWatch article.
What’s Behind the Rally?
Amazon is continuously expanding its workforce in a bid to meet the surging orders during the coronavirus crisis. Notably, seven U.S. Northeastern states have extended shutdown until May 15. The company has announced its latest plans to hire more 75,000 workers in addition to the recent hiring of 100,000 warehouse and delivery employees. Notably, all these people will be employed in positions varying from warehouse workers to delivery drivers. Moreover, Amazon has collaborated with ride-hailing company, Lyft (LYFT - Free Report) , where Lyft’s drivers have been asked to consider job opportunities at Amazon as means of extra income for positions like delivery drivers, warehouse workers and shopper jobs.
In the current scenario, people have to maintain social distancing and work remotely. Resultantly, cloud computing is seeing huge demand. It is supporting organizations in remotely processing a lot of information, developing and running key applications and services, and also helping employees across the world collaborate while working. Amazon also enjoys dominant position in the cloud-computing market, particularly in the Infrastructure as a Service (IaaS) space, thanks to Amazon Web Services (“AWS”), which is one of its high-margin generating businesses. Notably, 12.5% of total revenues were generated from AWS in 2019.
Given this, investors could tap Amazon through ETFs with the highest allocation to this Internet giant. Below we have highlighted five of them:
Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report)
This fund tracks the MSCI USA IMI Consumer Discretionary Index, holding 284 stocks in its basket. Of these, AMZN takes the top spot with 35.1% share. The product has amassed $607.8 million in its asset base. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #3 (Hold), with a Medium risk outlook.
This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 294 stocks in its basket. Of these, Amazon occupies the top position with 30.8% allocation. VCR charges investors 10 bps in annual fees. The product has managed about $2.43 billion in its asset base and carries a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most-popular product in this space, with AUM of nearly $11.12 billion. Holding 63 securities in its basket, Amazon takes the top spot with 26.1% of assets. The fund charges 0.13% in expense ratio and has a Zacks ETF Rank #2 with a Medium risk outlook (read: ETFs at Risk as U.S. Consumer Sentiment Sees a Steep Decline).
This is the first ETF focused exclusively on retailers that principally sell online. It follows the ProShares Online Retail Index, holding 25 stocks in its basket. Amazon is the top firm accounting for about 24.5% of the portfolio. The product has amassed $57 million in its asset base. It charges 58 bps in annual fees from investors (read: Is Coronavirus a Boon for Online Retail ETFs?).
This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, AMZN takes the top position in the basket with 22.7% share. The product has amassed $97.4 million in its asset base and charges 35 bps in annual fees. RTH has a Zacks ETF Rank #3 with a Medium risk outlook.
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ETFs to Gain on Amazon's Rally Amid Coronavirus Crisis
The United States continues to top the chart, with the highest number of coronavirus-infected cases. It recorded in excess of 671,425 cases with a death toll of around 33,286. In order to contain the spread of the virus, governments across the globe are shutting down economic activities and imposing social distancing measures.
In the current scenario, consumers are opting for online retailers to purchase food items and goods to minimize human contact. Backed by surging stay-at-home mandates, one of the largest e-commerce providers, Amazon (AMZN - Free Report) has been seeing a flurry of new home delivery orders.
Amazon has already gained 30.3% in 2020. It has increased 23.5% so far in the current month (as of Apr 16). Doug Anmuth, a J.P. Morgan analyst, has said that Amazon remains his "top idea" (per a MarketWatch article). He has also said that, "beyond the near-term benefits, we believe that [Amazon] will gain incremental share of both total retail and online retail in the downturn, as was the case in 2008-2009", according to the same MarketWatch article.
What’s Behind the Rally?
Amazon is continuously expanding its workforce in a bid to meet the surging orders during the coronavirus crisis. Notably, seven U.S. Northeastern states have extended shutdown until May 15. The company has announced its latest plans to hire more 75,000 workers in addition to the recent hiring of 100,000 warehouse and delivery employees. Notably, all these people will be employed in positions varying from warehouse workers to delivery drivers. Moreover, Amazon has collaborated with ride-hailing company, Lyft (LYFT - Free Report) , where Lyft’s drivers have been asked to consider job opportunities at Amazon as means of extra income for positions like delivery drivers, warehouse workers and shopper jobs.
In the current scenario, people have to maintain social distancing and work remotely. Resultantly, cloud computing is seeing huge demand. It is supporting organizations in remotely processing a lot of information, developing and running key applications and services, and also helping employees across the world collaborate while working. Amazon also enjoys dominant position in the cloud-computing market, particularly in the Infrastructure as a Service (IaaS) space, thanks to Amazon Web Services (“AWS”), which is one of its high-margin generating businesses. Notably, 12.5% of total revenues were generated from AWS in 2019.
Given this, investors could tap Amazon through ETFs with the highest allocation to this Internet giant. Below we have highlighted five of them:
Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report)
This fund tracks the MSCI USA IMI Consumer Discretionary Index, holding 284 stocks in its basket. Of these, AMZN takes the top spot with 35.1% share. The product has amassed $607.8 million in its asset base. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #3 (Hold), with a Medium risk outlook.
Vanguard Consumer Discretionary ETF (VCR - Free Report)
This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 294 stocks in its basket. Of these, Amazon occupies the top position with 30.8% allocation. VCR charges investors 10 bps in annual fees. The product has managed about $2.43 billion in its asset base and carries a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most-popular product in this space, with AUM of nearly $11.12 billion. Holding 63 securities in its basket, Amazon takes the top spot with 26.1% of assets. The fund charges 0.13% in expense ratio and has a Zacks ETF Rank #2 with a Medium risk outlook (read: ETFs at Risk as U.S. Consumer Sentiment Sees a Steep Decline).
ProShares Online Retail ETF (ONLN - Free Report)
This is the first ETF focused exclusively on retailers that principally sell online. It follows the ProShares Online Retail Index, holding 25 stocks in its basket. Amazon is the top firm accounting for about 24.5% of the portfolio. The product has amassed $57 million in its asset base. It charges 58 bps in annual fees from investors (read: Is Coronavirus a Boon for Online Retail ETFs?).
VanEck Vectors Retail ETF (RTH - Free Report)
This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, AMZN takes the top position in the basket with 22.7% share. The product has amassed $97.4 million in its asset base and charges 35 bps in annual fees. RTH has a Zacks ETF Rank #3 with a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>