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5 ETFs to Make the Most From Fourth of July

·5 min read

The COVID-19 pandemic has upset Americans Fourth of July celebrations this year, with most hesitating to go out of home, and join gatherings or attend public events.

Despite the coronavirus pandemic, many travelers will still be hitting the road for the Fourth of July weekend and beyond. This is especially true as AAA predicts that Americans will take roughly 700 million trips this Fourth of July holiday. Although this is a significantly lower number of travelers than AAA has forecast for Jul 4 in many years, the Independence Day weekend is expected to be 2020’s biggest travel weekend so far. Not many people will be flying to their destinations due to limited flight service but road trips will be a top travel trend, with motorists making up 97% of all Independence Day travel (read: ETF Strategies to Follow With U.S. Economy Slowly Reopening).

The pent-up demand lately due to the reopening of the economy coupled with low gas price will encourage road trips. Gas prices are currently 20% lower than a year ago. With reduced demand for gasoline as less people are leaving homes due the pandemic, the Independence Day will mark the lowest average price per gallon of gas on the holiday since 2004.

The celebration is incomplete without fireworks and barbecues. According to the National Retail Federation (NRF), about 76% Americans plan to celebrate Independence Day, down from 86% last year, with total spending of $76 per person on average. The average spending is in line with historical trends. Cookouts, barbecues and picnics continue to be the most popular activity (51%), followed by fireworks and community celebrations (24%). Investors should note that Independence Day marks the beginning of the busiest half of the year for retailers.

That said, this Fourth July will be a celebration of not only freedom, but also economic growth. Along with the spirit of Americans, this Independence Day should lift revenues and profits in various corners. Industries like transportation, lodging, hotel, restaurants, food and retail will benefit the most. Investors seeking to tap the fanfare could tap these industries through the following ETFs.

iShares Dow Jones Transportation Average Fund IYT

The ETF provides exposure to U.S. airlines, railroad and trucking companies by tracking the Dow Jones Transportation Average Index. It holds a small basket of 20 stocks with heavy concentration on the top four firms. Railroads takes the top spot with 37.4% share in the basket, while air freight and logistics (27%), trucking (19.4%) and airlines (10.4%) round off the next three. The fund has accumulated nearly $585.3 million in AUM and charges 42 bps in fees per year from investors. While the fund currently has a Zacks ETF Rank #4 (Sell), it is expected to get a near-term boost from the July Fourth holiday.

Invesco Dynamic Food & Beverage ETF PBJ

This product offers exposure to 32 companies engaged in the manufacture, sale or distribution of food and beverage products, agricultural products and products related to the development of new food technologies by tracking the Dynamic Food & Beverage Intellidex Index. The fund has amassed $67.1 million in its asset base, while trading in average daily volume of 15,000 shares. It charges 63 bps in annual fees from investors. This fund also has a Zacks ETF Rank #4 with a Medium risk outlook, underscoring that some pain might be in store though the event will definitely provide some relief (read: U.S. Manufacturing Points to a Recovery: 5 Winning ETF Areas).

Invesco Dynamic Leisure and Entertainment ETF PEJ

This fund follows the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 32 stocks. It is pretty well spread out across various securities as none accounts for more than 5.6% of total assets. The ETF has amassed $237.4 million in its asset base and has 0.63% in expense ratio. PEJ trades in paltry volume of 199,000 shares and has a Zacks ETF Rank #4 with a High risk outlook.

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top firm at 23.2%, while other firms hold less than 11% share. The product has amassed $115.5 million in its asset base and charges 35 bps in annual fees. RTH has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Sector Rotation: Investors Flocking to Cyclical ETFs).

Consumer Discretionary Select Sector SPDR Fund XLY

This is the largest and the most popular product in the consumer discretionary space with AUM of $13.1 billion and average daily volume of 6 million shares. It tracks the Consumer Discretionary Select Sector Index and holds 61 securities with higher concentration on the top firm Amazon (AMZN). Sector wise, Internet & direct marketing retail and specialty retail take the top two spots with 28.6% of assets each, followed by hotels, restaurants and leisure (18.8%). The fund charges 13 bps in fees per year and has a Zacks ETF Rank #2 with a Medium risk outlook.

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VanEck Vectors Retail ETF (RTH): ETF Research Reports
 
iShares Transportation Average ETF (IYT): ETF Research Reports
 
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
 
Invesco Dynamic Leisure and Entertainment ETF (PEJ): ETF Research Reports
 
Invesco Dynamic Food Beverage ETF (PBJ): ETF Research Reports
 
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