This certainly is the time of year to talk about consumer
discretionary and retail
ETFs
. The U.S. consumer, the driving force behind 70 percent of this
country's GDP, appears poised to flex his (and her) muscles this
holiday shopping season.
While this is the "most wonderful time of the year" and a
critical one at that for retail ETFs, it is easy for some
retail ETFs to slip through the cracks
as the conversation regarding these funds is usually dominated by
the SPDR S&P Retail ETF (NYSE:
XRT
). By virtue of an impressive year-to-date performance, the
Market Vectors Retail ETF (NYSE:
RTH
) has crept into the conversation as well, but there are more
than just two retail ETFs worth considering.
One of those ETFs is the semi-obscure PowerShares Retail
Portfolio (NYSE:
PMR
). The PowerShares Retail Portfolio has been around for over
seven years and has about $50 million in assets under management.
Combine that AUM total with average daily volume less than 23,000
shares and ETF AUM/volume critics, of which there are plenty,
practically have built-in excuses to gloss over PMR.
PMR's lineup is best described as a potpourri of retail names.
The fund features exposure to stocks ranging from Wal-Mart (NYSE:
WMT
) to Whole Foods (NASDAQ:
WFM
) to Costco (NASDAQ:
COST
) to Gap (NYSE:
GPS
).
What separates PMR from a fund such as RTH is small-cap
exposure. Approximately 42 percent of PMR's weight is devoted to
small caps, both growth and value names. And speaking of
allocations, PMR is validated as a holiday shopping play because
nearly two-thirds of its weight is devoted to discretionary
stocks. Over 28 percent of the fund's weight goes to staples
names with a small allocation being devoted to industrials.
Overall, nearly 61 percent of PMR's weight is allocated to
growth stocks. That translates to a somewhat elevated valuation.
PMR has a price-to-earnings ratio of 16.4 and a price-to-book
ratio of nearly 2.8,
according to PowerShares data
. That compares to a P/E/ of 15.35 and a price-to-book ratio of
2.45 for XRT. In its favor, PMR's constituents have an average
return on equity of almost 24 percent.
Based on pure performance, PMR is running third to RTH and XRT
on a year-to-date basis, but that does not mean the fund is not
worthy of consideration. PMR's weight, though not excessive, to
small-caps indicates the fund has utility in a risk-on
environment. Should the market experience a legitimate January
Effect in early 2013, the scenario under which small-caps lead an
early year market rally, PMR has the potential to outperform
other retail ETFs.
To that end, PMR's market capitalization and sector weightings
do imply some added beta, but that also means the spoils of
owning this fund can be rich in a cooperative market setting.
Consider paring PMR with the more conservative RTH to cover all
retail bases. Should the recent ebullience seen on Black Friday
carry over throughout the holiday shopping season, investors will
be able to start the new year out on the right note by taking
gains in both ETFs.
For more on ETFs, click
here
.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.