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Holiday Sales Strongest in Six Years: ETFs Set to Surge

Sweta Killa

Amid the stock market swoon, this holiday season has emerged as the best in six years with an e-commerce bonanza and surge in last-minute shopping. Total U.S. retail sales, excluding automobiles, rose 5.1% year over year between Nov 1 and Dec 24 per the MasterCard Advisors' SpendingPulse. Overall, U.S. consumers spent more than $850 billion this holiday season.

Notably, e-commerce sales surged 18.3% year over year between Nov 1 and Dec 19 boosted by 16.5% growth in apparel sales. Online sales at department stores, electronics and jewelry were also robust, rising between 7-10%. Meanwhile, in-store sales grew 4.3% in the same time period, thanks to ab accelerating economy, rising consumer confidence and higher spending. American economy is on track this year to expand at the fastest pace in 13 years, thanks to robust job creation, strong GDP growth, a 50-year low unemployment rate and solid wage gains (read: ETF & Stock Picks to Bet on Upbeat Retail Sales in November).

The growth rates are better than what the National Retail Federation (NRF) and Adobe had predicted. For November–December period, NRF had projected holiday sales (excluding autos, gas and restaurant) to grow 4.3%-4.8%, down from last year’s growth rate of 5.3% but higher than the five-year average of 3.9%. Adobe had forecast an increase of 14.8% in e-commerce sales this holiday season.

Given the solid holiday sales data, many corners of the consumer space including Internet are expected to see surge as and when the market rebounds. Below, we have highlighted some ETFs that could be excellent picks given the strongest holiday season in years. However, these are down over the past three-month period due to the worst market sell-off.

SPDR S&P Retail ETF XRT

This product tracks the S&P Retail Select Industry Index, holding 95 securities in its basket, with none accounting for more than 1.3%. The fund has amassed $399.9 million in its asset base and charges 35 bps in annual fees. Volume is extremely solid, exchanging nearly 7 million shares in hand a day on average. The fund has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Super Saturday the Biggest Shopping Day of 2018? 4 ETF Deals).

Amplify Online Retail ETF IBUY

This ETF has attracted $257.7 million in its asset base. It offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 41 stocks that are widely diversified, with each holding less than 4.8% of the assets. The product charges 65 bps in fees per year and trades in average daily volume of more than 127,000 shares.

ProShares Online Retail ETF ONLN

This is the first ETF focused exclusively on retailers that principally sell online. It follows the ProShares Online Retail Index, holding 21 stocks in its basket. Amazon AMZN accounts for the largest share of 24.2% in the portfolio. The product has amassed $22.9 million in its asset base and trades in a paltry volume of around 19,000 shares a day on average. It charges 58 bps in annual fees from investors.

O’Shares Global Internet Giants ETF OGIG

This fund invests in some of the largest global companies that derive most of their revenues from the Internet and e-commerce sectors that exhibit quality and growth potential by tracking the O’Shares Global Internet Giants Index. It holds a basket of 74 stocks with each accounting for less than 6.8% of the assets. OGIG has been able to attract $40.2 million in its asset base since its debut in early June and trades in average daily volume of 45,000 shares. The fund charges 48 bps in annual fees (read: Top ETF Deals for This Holiday Season).

First Trust Dow Jones Internet Index Fund FDN

This fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 41 stocks in its basket with heavy concentration on Amazon at 9.3% exposure. FDN is the most popular and liquid ETF in the broad technology space with AUM of $6.5 billion and average daily volume of around 773,000 shares. It charges 53 bps in fees per year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

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