|Bid||110.76 x 1200|
|Ask||110.81 x 1200|
|Day's Range||110.57 - 110.61|
|52 Week Range||95.33 - 113.01|
|PE Ratio (TTM)||N/A|
|YTD Daily Total Return||-0.62%|
|Beta (5Y Monthly)||1.19|
|Expense Ratio (net)||0.40%|
We discuss how the rapidly spreading coronavirus can sneak in to your portfolio and hurt returns from holdings in the consumer discretionary sector.
At a weight of about 10.3%, the consumer discretionary sector is merely the fifth-largest sector weight in the S&P 500, but that weight belies the sector's importance as a gauge of the health of the broader domestic economy. Consumer spending accounts for a massive percentage of U.S. GDP, and as a cyclical sector, consumer discretionary can provide investors with important clues regarding not only the direction of equity markets, but the economy at large.As measured by the Consumer Discretionary Select Sector SPDR (NYSEARCA:XLY), the largest consumer cyclical exchange traded fund (ETF), the sector is again performing well. Year-to-date, XLY is up 21%. But investors considering consumer discretionary stocks and ETFs have some factors to consider, including that, like any other sector, this group has some quality names and some that leave something to be desired.Morgan Stanley "analyzed more than 90 consumer-discretionary stocks, and found that only one-third achieved annual revenue growth of at least 5% over the past five years, while maintaining their profit margins," reports Barron's. "The companies that met those criteria outperformed the S&P 500 by 57 percentage points over the past five years. Those that failed lagged behind the market by 38 percentage points."InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Energy Stocks to Buy to Light Up Your Portfolio For investors seeking consumer cyclical exposure, these are some of the best ETFs to consider. Consumer Discretionary ETFs to Buy: Fidelity MSCI Consumer Discretionary ETF (FDIS)Expense Ratio: 0.084% per year, or $8.40 on a $10,000 investment.The Fidelity MSCI Consumer Discretionary ETF (NYSEARCA:FDIS) is not the largest ETF dedicated to this sector, but it is the least expensive. Like the aforementioned XLY, FDIS is a cap-weighted fund and cap-weighted consumer discretionary ETFs mean large weights to shares of Amazon (NASDAQ:AMZN).For investors looking for high concentration in just one stock, FDIS is one of the best ETFs. With a weight of nearly 26% to Amazon, FDIS is one of the best ETFs for investors looking for a proxy on the e-commerce giant.Sixteen U.S.-listed ETFs allocate about 23% or more of their weights to a single stock. FDIS is one of four funds where that stock is Amazon. FDIS is also one of the best ETFs for frugal investors because in addition to being the cheapest consumer cyclical ETF, Fidelity clients can trade it commission-free. FDIS is up 21.3% this year. ProShares Online Retail ETF (ONLN)Expense Ratio: 0.58%The ProShares Online Retail ETF (NYSEARCA:ONLN) is one of the best ETFs for investors looking to focus on the online retail theme, which continues eating away at market share previously commanded by traditional brick-and-mortar retailers. This fund tracks the ProShares Online Retail Index."Analysts expect the growth of online retail to continue. About 10% of global retail sales today are made online, leaving tremendous room for growth. Recent data indicates that figure could double by 2030," according to Maryland-based ProShares. * 10 Cheap Stocks to Buy Now Count ONLN among the best ETFs for Amazon exposure as well, as that stock commands over 24% of the fund's weight. China's Alibaba (NYSE:BABA) represents over 16% of ONLN's roster. Its strategy is working, as the fund is up nearly 33% this year, making it one of the best ETFs since the start of 2019. Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD)Source: Shutterstock Expense Ratio: 0.4%For investors looking to avoid the concentration risk that comes with cap-weighted consumer discretionary funds, the Invesco S&P 500 Equal Weight Consumer Discretionary ETF (NYSEARCA:RCD) is one of the best ETFs to consider.RCD can be seen as the equal-weight alternative to the aforementioned XLY or FDIS. The Invesco fund holds 64 stocks, none of which exceed weights of 2%, but this is not the best ETF for investors seeking Amazon via the ETF wrapper because RCD allocates just 1.80% of its weight to Amazon.None of RCD's holdings are considered small-caps, but mid-caps represent over half the fund's weight, reducing the average market value of RCD's holdings to just under $43 billion compared with $290.8 billion on the cap-weighted XLY. Even with the reduced weight to Amazon, RCD is up an admirable 20% this year. However, historical data confirm RCD's lack of Amazon exposure has affected the fund's long-term returns. Amplify Online Retail ETF (IBUY)Expense Ratio: 0.65%The Amplify Online Retail ETF (NASDAQ:IBUY) is the original ETF dedicated to online retail and remains one of the leaders in this space. IBUY debuted just over three years ago and has $293 million in assets under management.This is one of the best ETFs for investors looking to tap the online retail phenomenon without excessive exposure to Amazon. While Amazon is the largest e-commerce company and one of the 40 stocks held by IBUY, it is not a top 10 holding. None of IBUY's holdings exceed weights of 4.76%. Familiar names featured in IBUY include Etsy (NASDAQ:ETSY) and Netflix (NASDAQ:NFLX). * The 10 Best Stocks to Buy for May IBUY requires its components to generate at least 70% of their sales from online venues, a requirement not found with many retail ETFs. That requirement is a difference maker because since coming to market, IBUY has easily been one of the best ETFs in the retail space. Since inception, IBUY has returned 109.4% compared to a return of 7.4% of the largest traditional retail ETF over the same period. Global X MSCI China Consumer Discretionary ETF (CHIQ)Expense Ratio: 0.65%China is a massive e-commerce market and one with plenty of accessible investments for U.S. investors. Heavy on marquee Chinese online retail names, such as Alibaba, the Global X MSCI China Consumer Discretionary ETF (NYSEARCA:CHIQ) is one of the best ETFs for investors looking to tap the world's largest online retail market.CHIQ is an ETF for tactical investors to consider because China's online retail market is larger and growing faster than the comparable U.S. market. There are more Chinese internet users than there are people in the U.S. and many Chinese shoppers are accustomed to purchasing goods online or on mobile devices, creating significant opportunity for retailers there without the need to open capital-sapping brick-and-mortar stores.While it has been more volatile, an expected trait of Chinese stocks, CHIQ is beating the domestic XLY by 440 basis points over the past three years. Investors should dismiss CHIQ. The fund has a track record nearing a decade and over $170 million in assets under management.CHIQ could also be a way to play any thaw in the ongoing U.S./China trade tensions. Consumer spending in China is recovering from tariff-related hits, but it is not all the way back to pre-tariff levels. If the two economic heavyweights can work out trade differences, CHIQ could rally.As of this writing, Todd Shriber does not own any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Energy Stocks to Buy to Light Up Your Portfolio * 10 Vice Stocks to Spice Up Your Portfolio * 7 of the Best ETFs to Buy for a Slowing Economy Compare Brokers The post 5 Consumer Discretionary ETFs to Buy appeared first on InvestorPlace.
Shares of Nordstrom (NYSE:JWN) traded slightly lower after the department store retailer reported holiday quarter numbers that were largely mixed. Broadly speaking, earnings were strong, while revenues weren't, and the fiscal 2019 guide implies that this trend of weak top-line performance but strong bottom-line performance will persist for the foreseeable future. Investors weren't sure how to react to that news. Initially, JWN stock popped a few percentage points. Then, it reversed course, ending Friday trading the red.Source: Phillip Pessar via Flickr (Modified)In the big picture, continued weakness in JWN stock is a near-to-medium term buying opportunity. Four months ago, this was nearly a $70 stock. Now, it sits below $50. The 65-stock Invesco S&P 500 Equal Wt Cnsm Disc ETF (NYSEArca:RCD) is up 11.4% since early December while Nordstrom stock is down 4.8%.What's changed? Not enough to warrant a 30% discount in the Nordstrom stock price. To be sure, the quarter wasn't great. The full-price business is slowing and margins remain under pressure. But, its full-price retail is slowing because of tougher comps, and is stable in a long-term window.InvestorPlace - Stock Market News, Stock Advice & Trading TipsMargins are also expected to stabilize next year, thanks to full-price business improvements and cost cutting measures. Meanwhile, the off-price business is firing on all cylinders, and digital sales growth remains robust.Overall, while there are some signs of weakness, the overall JWN growth narrative remains largely healthy today. Yet at current levels, Nordstrom stock isn't priced for healthy, a disconnect that can't last for much longer. The retailer's numbers will improve throughout 2019. As they do, JWN stock will bounce back, and the shares will likely end the year close to $60. A Mixed Big PictureThe Nordstrom narrative can be summed up in four words: good, but not great.In 2018, Nordstrom was staging a huge comeback as the broader retail scene stabilized after years of losing share to the e-commerce market. Nordstorm led the pack in finding its footing via a robust omni-channel presence and unique value prop as a medium-to high-end retailer. That proposition enabled the Seattle-based operator to drive consistently positive comp sales growth at both its full- and off-price stores. Wall Street bought into this idea that Nordstrom was back to its normal self, pushing JWN stock to near $70 a share. * 7 March Madness Stocks to Consider for the Big Dance Unfortunately, that isn't what's happening because Nordstrom continues to operate in a world where consumers can buy clothes from its neighbor Amazon (NASDAQ:AMZN) and other e-commerce retailers. Granted, Nordstrom is a medium-to high-end retailer with mitigated product portfolio overlap with other retailers. But, there is still some overlap, and that means that the retailer will continue to feel some competitive friction for the foreseeable future.This is what investors are seeing in the numbers now. As the lap got tougher in late 2018, comparable sales growth slowed. But, comps are still up on a two-year basis and are expected to be narrowly positive again next year. In other words, growth isn't on a runaway train to new highs, but rather on a slow and steady path higher.Overall, the Nordstrom narrative is a mixed bag. You have a retailer that clearly has staying power on the retail scene thanks to its unique value prop and product portfolio. But, staying power doesn't equal robust growth and because competition is as intense as ever, stamina over the next several years will translate into relatively muted top- and bottom-line growth. Still, that's good enough to warrant buying JWN stock at currently depressed levels. Nordstrom Stock is UndervaluedThe math behind buying JWN stock at current levels is pretty simple.You have a company that has a red-hot off-price business that has been, still is, and will continue to fire on all cylinders thanks to its ability to integrate reasonable prices with good quality. Meanwhile, the full-price business is slowing thanks to tougher laps. But, those laps get easier later in 2019, so growth should come back into the picture. Importantly, this business should remain a tepid grower over the next several years. * 9 Best Stocks to Buy on U.S.-China Trade Optimism Gross margins will get hit early in the year thanks to full-price weakness. But, as that business stabilizes in late 2019 and in the long term, gross margins should stabilize, too. The SG&A rate has been consistently rising. That, too, will end as generational investments phase out and the company continues to pull costs out of the system.So, in the big picture, Nordstrom should be able to grow sales at a tepid 1-2% rate over the next several years, while stabilizing EBIT margins in 6-7% range. Those growth assumptions, coupled with share buybacks, pave a path for Nordstrom to hit $5 in EPS by fiscal 2025, up from the current $3.32. Based on a market-average 16x forward multiple, that equates to a fiscal 2024 price target for JWN stock of $80. Discounted back by 7% per year (3 points below my normal 10% discount rate to account for the yield), that gives you a fiscal 2019 price target of roughly $57. Bottom Line on JWN StockThe Nordstrom story isn't great. But, it isn't awful either. Right now, JWN stock is priced for awful. This disconnect cannot last forever. Nordstrom's numbers will improve throughout 2019 as the lap gets easier. As those numbers improve, Nordstrom stock will rise, and prices close to $60 look achievable by year end.As of this writing, Luke Lango was long JWN and AMZN. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Reasons Kraft Heinz Stock Is a Contrarian Buy * 5 Housing Stocks to Buy for Renewed Homebuilder Confidence * 7 of the Best ETFs to Buy for a Rock-Solid Portfolio Compare Brokers The post Here's How Nordstrom Stock Can Rally Back Toward $60 In This Year appeared first on InvestorPlace.