While some investors are growing concerned over the market in
the near term, there are definitely still some pockets of growth
out there. In particular, investors may want to bank on the
retail segment as we approach summer.
This particular corner of the market has been riding strong
trends that have left it in an enviable position to open up May.
Solid data on the consumer spending front-which showed an
increase of 3.5% year-over-year-and a high level of consumer
sentiment both suggest that spending will not be slowing down
If this trend continues, it could be great news for extremely
discretionary sectors, and particularly retail. Fortunately for
those who do not want to make a concentrated bet on any one
company in the space, there are a number of retail
currently on the market (see
Is This a Bull Market for Retail ETFs?
However, it could be difficult for some to choose between the
group, as there are a number of key factors lurking below the
surface in this segment's ETFs. One way to narrow down the group
is by using the Zacks ETF Ranking system as a way to pick.
About the Zacks ETF Rank
The Zacks ETF Rank provides a recommendation for the ETF in
the context of our outlook for the underlying industry, sector,
style box, or asset class. Our proprietary methodology also takes
into account the risk preferences of investors. ETFs are ranked
on a scale of 1 (Strong Buy) to 5 (Strong Sell) while they also
receive one of three risk ratings, namely Low, Medium, or
The aim of our models is to select the best ETFs within each
risk category. We assign each ETF one of five ranks within each
risk bucket. Thus, the Zacks Rank reflects the expected return of
an ETF relative to other products with a similar level of risk
more on the Zacks ETF Rank
Top Low Risk Choice
By using this methodology, we find that a few retail ETFs
receive top Zacks ETF Ranks of 1 or 'Strong Buy'. However, there
is just one that receives a top rank and a 'low' risk rating, a
potentially potent combination in today's uncertain economic
That is because many investors remain uncertain about the
near-term trend in the market, and how best to play these trends
going forward. A low risk retail ETF could be a nice compromise
between a low volatility play and the strong retail trends, and
thus a potentially great choice for investors.
Top Ranked ETF in Focus: RTH
The one ETF that fits this bill is the
Market Vectors Retail ETF (
from Van Eck. The fund charges a somewhat low expense ratio of 35
basis points a year, and sees average volume of just over 100,000
shares a day.
It is also worth noting that the fund is heavily exposed to
large cap stocks, as these make up the bulk of the 26 stock fund.
In particular, the top three holdings are Wal-Mart, Home Depot,
and Amazon.com, and these combine to take up more than 27% of
assets (also read
Access the $30 Trillion Consumer Market with
From a sector look, specialty retail takes the top spot (33%),
followed by big box stores and department stores, which combine
to take up another 30% of assets. Beyond that, a number of other
segments such as drug stores, health care services, and internet
retail help to round out the rest of the portfolio and prevent a
heavy industry concentration.
RTH has been a pretty solid choice from a performance
perspective, beating out the S&P 500 over the trailing six
month period by a few basis points. This trend is even more
pronounced when looking at longer time frames, suggesting that
retail and RTH in particular could continue to be a great
There are some strong trends that are supporting the retail
sector and that suggest that the space could be a good pick going
forward. However, the market remains a bit shaky so lower risk
choices could be the way to go for now.
Fortunately, investors can look to the retail segment and a
Top Ranked, low risk, pick for exposure during this time; RTH.
The fund offers up great exposure to the space, and looks to be
less volatile thanks to its large cap focus, meaning that it
could be an interesting selection for retail ETF investors
in the near term.
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AMAZON.COM INC (AMZN): Free Stock Analysis
HOME DEPOT (HD): Free Stock Analysis Report
MKT VEC-RETAIL (RTH): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
WAL-MART STORES (WMT): Free Stock Analysis
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