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Retail ETFs Surge On Sales Report

Hung Tran

Retail sales rose in July for a fourth-consecutive month, and a number of related ETFs are reaping the rewards of a recovering economy.

Retail sales increased 0.2 percent in July from June, marking the fourth-straight month of retail sales gains, according to data from the Commerce Department. “Core” retail sales, which exclude the auto, gas and building supply sectors, rose 0.5 percent in July. Sales for June were revised upward, rising 0.6 percent in June from May on a surge in auto sales.

However, economists are tepid over the latest retail report. “Overall, the picture on consumer spending still looks fairly middling—not particularly great, but not terrible either,” said Michael Feroli, chief U.S. economist at J.P. Morgan Chase, in an interview.

Consequently, investors who have bet on retail-focused ETFs have had a good run-up on performance. For example, the Market Vectors Retail ETF (RTH) is up 25.67 percent year-to-date through Aug. 12, according to data from IndexUniverse. Also, the PowerShares Dynamic Retail Portfolio (PMR) is up 29.75 percent and the SPDR S'P Retail ETF (XRT) is up 29.99 percent.

Paul Britt, ETF analyst at IndexUniverse, who focuses on U.S. size and style equities ETFs and alternative ETFs, said that RTH is a cap-weighted global fund, but is currently dominated by U.S. retail names such as Walmart Stores Inc. (9.10 percent), Home Depot Inc. (8.12 percent) and Amazon.com Inc. (7.60 percent).

On the other hand, XRT’s exposure is different in that it’s an equal-weighted fund that “has more exposure to smaller companies than you otherwise expect,” according to Britt. XRT’s three biggest holdings include Groupon Inc. (1.19 percent), Shutterfly Inc. (1.17 percent) and Best Buy Co. Inc. (1.16 percent).


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