E-commerce has seen robust demand in the wake of the pandemic. The country is witnessing an exponential increase in coronavirus infections with each passing day, right before the peak holiday shopping season. Hence, the holiday season will look different this year, as a major portion of shopping will continue to be on e-commerce platforms.
With October retail sales missing expectations and new lockdown restrictions taking effect in different parts of the country, retail’s near-term prospects look bleak. Shoppers are going to stay away from traditional brick-and-mortar stores, and consequently, more shopping will be done online this season than ever before. According to Adobe Analytics, US holiday online sales this season are expected to surge 33% year-over-year to a record $189 billion.
However, as the threat of a second-round of country-wide lockdown looms, stocks may see volatility, making it important for investors to invest accordingly. As ETFs provide a broad and diversified exposure at minimal operating costs, it could be a good idea to invest in ETFs.
The e-commerce momentum will continue for a long term and the holiday season will be a huge catalyst. Here are four ETFs that are well-positioned to soar as Americans gear up to splurge this holiday season: Amplify Online Retail ETF (IBUY), ProShares Online Retail ETF (ONLN), Global X E-commerce ETF (EBIZ), and SPDR S&P Internet ETF (XWEB).
Amplify Online Retail ETF (IBUY)
IBUY seeks to provide a cost-efficient way for investors to own a basket of companies with significant revenue from online and virtual retail sales. The fund’s portfolio offers convenient diversification across market capitalization, geography, and business focus. Portfolio holdings fall into three categories – traditional retail, marketplace and travel. The ETF seeks to correspond to the investment results of the EQM Online Retail Index, comprised of firms with at least 70% of their revenues from online sales.
IBUY has $1.15 billion in AUM and an expense ratio of 0.65%. The ETF has an MSCI ESG Fund Rating of BB based on a score of 3.03 out of 10. Although the fund does have international exposure, 76.8% of its assets are in the United States. The fund pays an annual dividend of $0.15, yielding 0.15%.
The fund currently holds 58 companies with a 63.6% exposure to the traditional retail segment, followed by 27.1% and 9.3% weightings to the marketplace and travel segments, respectively. The top 3 holdings of the fund are Qurate Retail, Inc. (QRTEA), Groupon, Inc. (GRPN), and Lands’ End, Inc. (LE), with the weights of 3.6%, 3%, and 3%, respectively.
IBUY has gained 99.4% year-to-date to close yesterday’s trading session at $102.42, after hitting an all-time high of $102.90. The fund has witnessed net inflows of $445.73 million in the past six months and is up more than 60% in the same period.
How does IBUY stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Industry Rank
A for Overall POWR Rating.
It is ranked #9 out of 42 ETFs in the Consumer-Focused ETFs group.
ProShares Online Retail ETF (ONLN)
Online retail is soaring, thanks to the pandemic push, putting pressure on traditional stores and the changing retail landscape. ONLN lets investors tap into the potential growth of online retail by pinpointing retailers that principally sell online or through other non-store sales channels, such as mobile or app purchase. The ETF seeks to track the performance of the ProShares Online Retail Index, a modified market capitalization weighted index that puts emphasis on industry leaders, while also providing industry diversification.
ONLN has $724.8 million in AUM and an expense ratio of 0.58%. The fund pays an annual dividend of $0.37, translating into a 0.54% yield. The ETF has an MSCI ESG Fund Rating of BBB based on a score of 5.43 out of 10.
The fund has a 74.2% allocation in the United States, followed by a 21% and 2.3% exposure to China and Argentina, respectively. The top 3, out of 27 holdings, in the ETF are Amazon.com Inc. (AMZN), Alibaba Group Holding (BABA), and QRTEA, with weights of 22.7%, 10.2%, and 6.2%, respectively.
ONLN has gained 95% so far this year to close yesterday’s trading session at $70.29. The ETF witnessed a net inflow of $543.5 million in the past six months and is up nearly 54% in the same period. ONLN is all set to hit a fresh high and is presently trading just 0.6% below its 52-week high of $70.70.
ONLN’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade and Buy & Hold Grade, and a “B” for Industry Rank. Among the 42 ETFs in the Consumer-Focused ETFs group, it’s ranked #36.
Global X E-commerce ETF (EBIZ)
EBIZ enables investors to access high growth potential through companies that are positioned to benefit from the increased adoption of E-commerce as a distribution model, including companies whose principal business is in operating E-commerce platforms, providing E-commerce software and services, and/or selling goods and services online. The fund seeks investment results that correspond to the performance of the Solactive E-commerce Index.
EBIZ has $110.9 million in AUM and an expense ratio of 0.50%. The ETF has an MSCI ESG Fund Rating of BBB based on a score of 4.48 out of 10. The fund has both domestic and international exposure, with 61.8% of its assets in the United States, followed by 13.9% and 10.9% to Hong Kong and China, respectively. The fund pays an annual dividend of $0.03, yielding 0.11%.
The fund currently holds 40 companies with a 74.2% exposure to the Consumer Discretionary sector, followed by an exposure of 11% and 6.3% to Information Technology and Communication Services sectors, respectively. The top 3 holdings of the fund are Pinduoduo Inc. (PDD), MercadoLibre, Inc. (MELI), and JD.com, Inc. (JD), with weights of 5.9%, 5.2%, and 5%, respectively.
EBIZ has gained 65.9% year-to-date to close yesterday’s trading session at $30.53, after hitting an all-time high of $30.63. The fund has witnessed net inflows of $81.7 million in the past six months and is up more than 45% in the same period.
It’s no surprise that EBIZ is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade and a “B” for Industry Rank. It is ranked #23 out of 107 Global Equities ETFs group.
SPDR S&P Internet ETF (XWEB)
XWEB seeks to provide the investment results of the S&P Internet Select Industry Index, an equal-weighted index of internet retail, software, and services companies, that represents the internet segment of the S&P Total Market Index. The ETF focuses on internet companies within the technology sector, avoiding hardware and semiconductors.
XWEB has $51.17 million in AUM and an expense ratio of 0.35%. The fund pays an annual dividend of $0.34, translating into a 0.55% yield. The ETF has an MSCI ESG Fund Rating of BB based on a score of 3.02 out of 10.
The fund currently holds 46 companies with the Internet & Direct Marketing Retail sub-industry naturally leading the way, at an 41.7% weighting. The ETF has an exposure of 38.3% and 20% to Interactive Media & Services, and Internet Services & Infrastructure, respectively. The top 3 holdings of the fund are Magnite Inc., Pinterest Inc. (PINS) and Snap Inc. (SNAP), with weights of 5.1%, 3.9%, and 3.6%, respectively.
XWEB has gained 70% year-to-date to close yesterday’s trading session at $138.93, after hitting an all-time high of $139.33. The fund has witnessed net inflows of $20.85 million in the past six months and is up 49.7% during the same period.
XWEB’s strong momentum is reflected in its POWR Ratings, it has a “Strong Buy” rating with an “A” in Trade Grade, Buy & Hold Grade, and Industry Rank and “B” in Peer Grade. Within the Technology Equities ETFs, it’s ranked #51 out of 95 ETFs.
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IBUY shares were trading at $103.01 per share on Tuesday afternoon, up $0.59 (+0.58%). Year-to-date, IBUY has gained 100.58%, versus a 14.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies.
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