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Why a new retail ETF is 24% invested in Amazon

ProShares is betting big on e-commerce with a new exchange-traded fund that’s roughly one-fourth invested in Amazon (AMZN). The company launched the ETF this week, and it’s also invested in other online retailers including Chinese e-commerce behemoth Alibaba (BABA).

On Friday, Yahoo Finance’s Alexis Christoforous asked Simeon Hyman, chief investment strategist at ProShares, whether having such a large stake in Amazon is a risky move.

‘There’s a long runway there’

An ETF trades like a stock and tracks a basket of securities that might be hard to invest in individually. With Amazon trading at nearly $1,850 a share, which some experts say is too expensive, this could be a cheaper way to get exposure to the stock.

“I’ll tell you what. It’s a lot less risky than just buying Amazon,” Hyman said, also noting that the ETF is not simply invested in internet companies but is focused on internet retailers such as Amazon.

“This is not just all things internet,” he said, making a reference to Facebook’s big earnings miss this week and subsequent selloff.

He acknowledged that, to some extent, the ETF is a bet against brick-and-mortar.

“Only 10% of sales in the U.S. are online today, so there’s a lot of room to go there,” he said. Hyman also noted, “Amazon is a dominant player online, but there’s a long runway there.“

“I mean, they’re only one-third the size of Walmart. And remember, that was the original retail disruption story.”

ProShares’ Simeon Hyman talks to Alexis Christoforous on Yahoo Finance.
ProShares’ Simeon Hyman talks to Alexis Christoforous on Yahoo Finance.

The ProShares Online Retail Index (ONLN) is made up of 21 companies U.S. and foreign online retailers, including Netflix (NFLX). While Netflix isn’t always considered a retailer, Hyman noted that it “put Blockbuster out of business.”

Almost of a quarter of the fund — 24.18% — is allocated to Amazon. The next biggest weight goes to Alibaba (BABA) — at 15.54%.

ONLN isn’t the only ETF that holds Amazon — the Consumer Discretionary SPDR ETF (XLY), the Vanguard Consumer Discretionary ETF (VCR) and the iShares US Consumer Services ETF (IYC), for example, are also exposed to the e-commerce giant.

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