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5 ETFs to Profit From July Fourth Celebrations

Sweta Killa

As one of the busiest travel holidays, this Fourth of July promises big business as pockets are heavier with robust consumer spending and rising disposable income.

While a strong U.S. economy and low unemployment have translated into rising income, lower gas prices than last summer have led to increased savings for long weekend gateways. This is especially true as gas price has been on the downtrend. Gas prices are currently hovering around $2.73, much cheaper than the last year’s Memorial Day weekend, and are expected to drop further to $2.70 this summer per AAA.

AAA estimates that a record 49 million Americans are making plans to honor the red, white and blue with an Independence Day gateway this year. This represents an increase of 4.1% from last year. Of them, 41.4 million (up 4.3%) will go on a road trip, 3.96 million (up 5.3%) will fly, and 3.55 million will travel by trains, buses and cruises (read: S&P 500 Hits New High to Start 2H: Top-Ranked ETFs to Buy).

Though travelers will enjoy lower gas prices, they will have to feel the pinch of other travel costs this holiday. According to AAA’s Leisure Travel Index, airfares on average are 10% more expensive than last Independence Day, while average car rental rates are 5% higher than last year at $69 daily. Meanwhile, midrange accommodations are expected to cost travelers between $153 for AAA Two Diamond and $189 for AAA Three Diamond Rated hotels.

The celebration is incomplete without fireworks and barbecues. According to the National Retail Federation (NRF), about 86% Americans plan to celebrate Independence Day with total spending of $6.78 billion or $73.33 per person, down from $6.94 billion or $75.35 per person. Cookouts, barbecues and picnics continue to be the most popular activity (61%), followed by fireworks and community celebrations (40%). As such, Independence Day marks the beginning of the busiest half of the year for retailers. Many retailers are already flashing exciting deals for July Fourth and massive discounts are in the cards for a specific day.

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 the broad transportation sector by tracking the Dow Jones Transportation Average Index. It holds a small basket of 20 stocks with heavy concentration on the top three firms. Railroads takes the top spot with 33.3% share in the basket, while air freight and logistics (24.7%), airlines (18.1%) and trucking (16.9%) round off the next three. The fund has accumulated nearly $510.3 million in AUM and charges 43 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 (read: Transport ETFs in Focus on FedEx Earnings Beat).

U.S. Global Jets ETF JETS

This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. In total, the product holds 35 securities that are heavily concentrated on the top four firms with a double-digit allocation each. Other firms hold no more than 4.1% share. The fund has gathered $70.1 million in its asset base. It charges investors 60 bps in annual fees but carries a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: ETF Winners & Losers Amid Cooling U.S. Inflation).

Invesco Dynamic Food & Beverage ETF PBJ

This product offers exposure to 30 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 $70.6 million in its asset base, while trading in average daily volume of 8,000 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.

Invesco Dynamic Leisure and Entertainment ETF PEJ

This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 30 stocks. It is pretty well spread out across various securities as none accounts for more than 5.5% of total assets. The product has substantial exposure to restaurants, which make up for 28% share, while hotels & leisure facilities also make up for 18% of the portfolio. The ETF has amassed $60.9 million in its asset base and has 0.63% in expense ratio. PEJ trades in paltry volume of 16,0000 shares and has a Zacks ETF Rank #3 with a High risk outlook (read: ETFs to Gain on Disney's Strong Earnings).

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 21.3%, while other firms hold less than 11% share. The ETF has a certain tilt toward specialty retail and Internet & direct marketing that collectively make up for more than half of the portfolio. The product has amassed $68.3 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.

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