3 Best Performing Consumer ETFs This Holiday Season

Despite the weak start and six less shopping days, the 2013 U.S. holiday season – touted the most crucial since the 2008 recession –turned out stronger than most analysts’ expectation. This is largely thanks to huge discounts, increased promotional activities and long-hour store openings by most retailers that succeeded in attracting budget-constrained consumers to shop more (read: 3 Hot Sector ETFs for 2014).

Total U.S. retail sales (during the period of November 1-December 24) climbed 3.5% year over year, according to the latest data from MasterCard Advisors' SpendingPulse. This represents the highest increase in three years.

Jewelry and children’s apparel were the top two performing categories. Sales of holiday-related categories such as clothing, electronics and luxury goods, rose 2.3% during the period.

Most of the sales were driven by a surge in e-commerce as customers focused more on online purchases. As per the Web analytics company firm – ComScore – online sales were up nearly 10% for the first 52 days of November and December from $38.91 billion last year.

The heavy online traffic was seen on Cyber Monday (December 2) with record $1.735 billion sales, closely followed by sales of $1.41 billion on December 3 and $1.40 billion on ‘Green Monday’ (December 9) (read: Top ETF Deals for Cyber Monday).

For the holiday season year-to-date, the categories that enjoyed the highest sales include video game consoles and accessories, apparel and accessories, consumer electronics, computer hardware, and home and garden products. Thanks to this, some consumer ETFs were clearly the biggest beneficiaries this holiday season.

While most of these generated more than 4% returns during this period, the following three ETFs were the biggest gainers and outpaced the broad market funds. The trio has top Zacks ETF Ranks too, suggesting bullish trends in the coming months as well.

Given this, any of these could be better plays in the recovering economy and may continue to outperform in 2014 (see: all the Consumer Discretionary ETFs here):

PowerShares Dynamic Media Portfolio (PBS)

This fund tracks the Dynamic Media Intellidex Index and seeks to offer capital appreciation by investing in the companies that are selected on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. This approach results in a small basket of 30 media stocks, which are somewhat concentrated in its top 10 firms with nearly 45% of assets.

CBS (CBS), Dish Network (DISH) and Time Warner (TWX) are the top three firms with a combined share of 15%. The product has amassed $325.3 million in its asset base while it trades in solid volume of more than 142,000 shares a day. The ETF charges 63 bps in annual fees and added nearly 9.4% this holiday season (read: Media ETF Leading the Consumer Sector Higher).

S&P SmallCap Consumer Discretionary Portfolio (PSCD)

This fund provides exposure to the small cap segment of the consumer discretionary space by tracking the S&P SmallCap 600 Capped Consumer Discretionary Index. The ETF holds 101 securities in its basket that are well spread out across the components as each security holds less than 3.6% of the assets (read: Time to Bet on This Small Cap Consumer ETF).

Within the consumer discretionary sector, specialty retail takes the top spot with roughly one-third of the total, followed by modest allocations to restaurants, and apparel and luxury goods.

The product has attracted $119.7 million in AUM while sees light volume of just 11,000 shares per day. The ETF charges 0.29% in expense ratio and returned over 7% this holiday season.

Market Vectors Gaming ETF (BJK)

This product follows the Market Vectors Global Gaming Index, which measures the performance of the global gaming industry. Holding 45 securities in its basket, the fund is guilty of concentration at 55% of total assets with largest allocations going to Las Vegas Sands (LVS), Sands China and Wynn Resorts (WYNN).

While casino and gaming take the top spot with 90% share, recreational products, investment companies, REIT and software programing also take portions of the basket. From a country look, American companies dominate the fund’s portfolio at 44.5%, followed by China (14.6%), Malaysia (11.8%) and Australia (8%).

The fund has AUM of $81.3 million and average daily volume of nearly 21,000 shares per day, suggesting an additional cost for the fund beyond the expense ratio of 0.65%. BJK rose over 6% during the holiday season (read: Beat the Market with Smart Beta ETFs).



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