ETFs in Focus on Impressive Rise in May Retail Sales
The latest retail sales figures for May have come as a breather for investors. Amid a slowdown in U.S. manufacturing activity in May, trade war tensions with China, India and Mexico, the latest retail sales data revives some hope about improvement in U.S. economy. In fact, the sales numbers for April were also revised higher (read: Consumer Staples ETFs Red Hot: Will the Rally Last?).
Although volatility haunts the U.S markets with concerns over G-20 talks between President’s Trump and Xi and Fed’s impending decision on U.S. rate cuts, certain ETFs from areas where sales shone in the month can cheer investors up.
What do the Numbers Say?
U.S. retail sales increased 0.5% in May from the previous month and rose 3.2% year over year. This also compares to market expectations of a 0.6% rise. In fact, total sales for March through May 2019 were up 3.6% year over year. As many as11 of the 13 major retail categories showed month-over-month increases. The rise in retail sales was helped by sales of motor vehicles and a range of other goods, per tradingeconomics.
Moreover, April’s retail sales data was raised to reflect an increase of 0.3%, instead of a 0.2% decline, as previously reported.
Are the Numbers Good Enough?
Interestingly, with the release of encouraging data, growth worries in the United States have abated a bit. Furthermore, per a Bloomberg article, Fed might delay cuts in interest rates following the health retail sales numbers. In fact, following the reports, some analysts raised their forecasts for economic growth in second-quarter 2019. In this regard, JP Morgan revised its forecast to a 1.75% annual rate from 1%. IHS Markit’s Macroeconomic Advisers also raised its tracking forecast to 1.8% from 1.4%.
Moreover, per an article on moneycontrol.com, the release of retail numbers had resulted in a rise in dollar and short-dated U.S. Treasury yields and thus, flattened the yield curve.
ETF’s in Focus
Against this backdrop, we recommend a few ETFs from areas where sales rose last month.
Motor Vehicle & Parts Dealers
Sales at motor vehicle & parts dealers grew 0.7% versus a decline of 0.5% in April.
First Trust NASDAQ Global Auto Index Fund CARZ
The underlying NASDAQ OMX Global Auto Index of the fund is designed to track the performance of the largest and most-liquid companies engaged in manufacturing automobiles. CARZ has a lower level of $19 million in AUM and trades in a small average daily trading volume of about 5,200 shares. The product charges 70 bps in fees per year and has a Zacks ETF Rank #3 (Hold) with a High-risk outlook (read: Auto Sales Rise in May: ETFs & Stocks in Focus).
Strong “Nonstore” Retail Sales
The non-store sales rose 1.4% in May, reflecting the sturdiest gain since January.
Amplify Online Retail ETF IBUY
This ETF has attracted $271.2 million in its asset base and offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 40 stocks with each accounting for less than 4.05% of the assets and trades in an average daily trading volume of about 86,000 shares. The product charges 65 bps in fees per year (read: Q1 Earnings Fail to Boost Retail ETFs).
ProShares Online Retail ETF ONLN
This is the first ETF focused exclusively on retailers that principally sell online. It follows the ProShares Online Retail Index, holding 21 stocks in its basket. The product has amassed $22.4 million in its asset base while trading in a paltry volume of around 20,500 shares a day on average. It charges 58 bps in annual fees from investors (read: ETFs to Tap on Alibaba's Revenue Growth in Q4).
Restaurants and Bars
Sales at restaurants and bars were up 0.7% in May.
Invesco Dynamic Food & Beverage ETF PBJ
Though the fund has a Zacks Rank #4 (Sell) over the medium term, the latest retail sales may give it a boost. The underlying index of the fund — the Dynamic Food & Beverage Intellidex Index — comprises stocks of 30 U.S. food and beverage companies. The product has amassed $71.5 million in its asset base while trading in a small volume of around 8,000 shares a day on average. It charges 63 bps in annual fees from investors (read: ETF Winners & Losers Amid Cooling U.S. Inflation).
Health & Personal Care Stores
Sales at health & personal care grew steadily in May.
The Obesity ETF SLIM
The underlying Solactive Obesity Index tracks the performance of global companies focusing on obesity-related diseases, weight-loss programs, weight-loss supplements and plus-sized apparel. The product has amassed $13.5 million in its asset base while trading in a small volume of around 2,000 shares a day on average. It charges 35 bps in annual fees from investors.
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Invesco Dynamic Food & Beverage ETF (PBJ): ETF Research Reports
Amplify Online Retail ETF (IBUY): ETF Research Reports
First Trust NASDAQ Global Auto Index Fund (CARZ): ETF Research Reports
ProShares Online Retail ETF (ONLN): ETF Research Reports
The Obesity ETF (SLIM): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.