The Zacks Analyst Blog Highlights: Market Vectors Retail ETF, Amazon.com, Home Depot, Guggenheim S&P Equal Weight Consumer Discretionary ETF and PowerShares DWA Consumer Cyclicals Momentum Portfolio
CHICAGO, Dec. 9, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Market Vectors Retail ETF (AMEX:RTH-Free Report), Amazon.com (Nasdaq:AMZN-Free Report), Home Depot (NYSE:HD-Free Report), Guggenheim S&P Equal Weight Consumer Discretionary ETF (AMEX:RCD-Free Report) and PowerShares DWA Consumer Cyclicals Momentum Portfolio (AMEX:PEZ-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
Complete Your Holiday Shopping with These ETFS
Perhaps it is better not to treat Thanksgiving Day and Black Friday as the spending indication by retailers. The slothfulness seen in these two days are being made up by early discounts and long promotional deals at the start of November that have so long been luring shoppers. Naturally, the 2014 holiday shopping is heading toward a strong growth trajectory.
Further, strengthening U.S. economic activities, a healthy job market, a gradual recovery in housing and of course, the unbelievable drop in gasoline prices are leading to fatter wallets and higher spending power. Added to this are the best-ever Cyber Monday online sales which are likely to drive up the holiday season on high gear.
Fast Recap of Thanksgiving Weekend and Cyber Monday
Fewer people shopped in stores or online on the Black Friday and Thanksgiving weekend due to stretched out deals and early promotional strategies. According to the data compiled by the National Retail Federation, the numbers from this big four-day holiday weekend are down across the board. Shoppers at stores and online declined 5.2% to 133.7 million over last year, while total spending fell 11% to $50.9 billion.
Despite weak traffic in the first holiday weekend, Cyber Monday emerged as a stronger online shopping day, hitting $2.04 billion in online sales for the first time, as per the web analytics firm ComScore. In fact, Cyber Monday sales jumped 17% year over year and accounted for nearly one-third of total online sales for the five-day period from Thanksgiving. Total online sales rose 24% to $6.6 billion from Thanksgiving through Cyber Monday (read: Internet ETFs and Stocks Set to Surge Post Cyber Monday).
Early Promos Drive Retail Sales in November
U.S. same-store retail sales, excluding drugstores, rose 5.2% in November and were well ahead of the market expectation of 3%, as per the data tracked by Swampscott, Massachusetts-based Retail Metrics. Large promotional activities and early holiday discounts are prompting shoppers to spend more and this trend is likely to continue this month as well.
Mixed Readings on Consumer Sentiment
The Consumer Confidence Index measured by the Conference Board – a barometer of the U.S. consumer health – dropped to 88.7 in November from a revised 94.1 in October and lower than the consensus estimate of 96. This was the index's lowest reading since June.
On the other hand, the Thomson Reuters/University of Michigan index of consumer sentiment increased to 88.8 for November, up from 86.9 in October but below than the consensus estimate of 90 as polled by Reuters. The number represents the highest level of consumer confidence in seven years boosted by improving economic conditions, lower fuel prices and accelerating job prospects.
U.S. on Track to Full Growth
The U.S. is on a strong growth trajectory with the economy showing its strongest two consecutive quarters of growth in more than a decade. The economy expanded at a solid clip of 3.9% annually in the third quarter, up from the initial estimate of 3.5%, and was followed by 4.6% growth in the second quarter. The solid growth was driven by higher consumer and business spending.
Consumer spending, which accounts for 70% of the total economic growth, rose 2.2% in the third quarter, up from initial estimate of 1.8% while business spending climbed 10.7%, up from 7.2% expectation (read: Holiday Season Driving Up Auto Sales: ETFs and Stocks to Consider).
The labor market has also hit a robust recovery with its continued streak of monthly job growth and rising wages in November. This is especially true as the U.S. economy added 321,000 jobs last month, marking the best numbers in nearly three years. With just a month to go, the country is on track for the strongest annual job growth since late 1999.
The job growth is widespread with professional and business services, retail trade, health care, and manufacturing all reporting significant monthly job growth in November. Meanwhile, average hourly wages rose 0.37% to $24.66 in November from $24.57 in October and 2.1% on an annual basis.
Apart from these, gradual recovery in the housing market as well as accelerating manufacturing and service activities are driving the U.S. economy higher, setting the case for a stronger holiday season this time.
As a result, National Retail Federation (NRF) expects holiday sales to grow 4.1% for the six-week period (November and December) to $616.9 billion. This is much higher than the 3.1% rise seen last holiday season and average growth of 2.9% over the past one decade. If this season's prediction comes true, U.S. will have spent over 4% higher for the first time in three years. Meanwhile, online sales are projected to grow 8–11% to $105 billion according to Shop.org.
ETFs to Consider
Given bullish holiday optimism, a look at the consumer space could be worthwhile. Investors seeking to ride out the strong shopping season could play with the following ETFs in a diversified way. Any of these products could make for a compelling choice given that these have a Zacks ETF Rank of 3 or 'Hold' rating and have gained at least 5.5% in the past one-month period (see: all the Consumer Discretionary ETFs here).
Market Vectors Retail ETF (AMEX:RTH-Free Report)
This fund provides exposure to the retail segment of the broad consumer space by tracking the Market Vectors US Listed Retail 25 Index. It holds about 26 stocks in its basket with AUM of $116.1 million while average daily volume is light under 35,000 shares. Expense ratio came in at 0.35%.
The product is a large cap centric fund and is heavily concentrated on the top 10 holdings with 63.6% of assets – the largest allocations going to Amazon.com (Nasdaq:AMZN-Free Report) and Home Depot (NYSE:HD-Free Report). Sector wise, specialty retail occupies the top position with less than one-third share, followed by double-digit allocation to hypermarkets, drug stores, departmental stores, and health care services.
Guggenheim S&P Equal Weight Consumer Discretionary ETF (AMEX:RCD-Free Report)
This fund provides wide exposure across the consumer discretionary market with an equal weight methodology with none holding more than 1.45% of assets. It follows the S&P 500 Equal Weight Index Consumer Discretionary index and holds 85 securities in its basket. Though mid caps account for the half of the fund's portfolio, large caps take the remainder and only 2% goes to small caps.
In terms of industries, specialty retail takes the top spot at roughly 22.3% of the total, followed by modest allocations to media, hotel restaurants and leisure, and household durables. The fund has amassed $100.3 million in its asset base and trades in a small volume at nearly 16,000 shares a day. It charges an annual fee of 40 bps from investors (read: Retail ETFs Gain Ahead of Holiday Season on Decent Earnings).
PowerShares DWA Consumer Cyclicals Momentum Portfolio (AMEX:PEZ-Free Report)
This fund provides exposure to 37 consumer stocks having positive relative strength (momentum) characteristics by tracking the DWA Consumer Cyclicals Technical Leaders Index. It is often overlooked by investors as depicted by its AUM of $62 million and averaged daily volume of 12,000 shares. The expense ratio came in at 0.60%.
PXI is pretty spread out across securities as each holds less than 5% of assets. It has a slight tilt toward mid caps at 48% while large and small caps account for 31% and 21% share, respectively. Further, about one-fourth of the portfolio is dominated by specialty retail while textiles apparel and luxury goods, airlines, Internet & catalog retail, and hotel restaurants and leisure round off the top five positions with double-digit exposure.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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