Forget Amazon, Buy 5 Reopening-Friendly Consumer ETFs Instead (Revised)

Last week was Amazon’s AMZN’s worst week since 2018, per CNBC, as the rising rate worries hit the growth stocks hard. Amazon’s shares slumped 12% last week. Amazon currently has a Zacks Rank #4 (Sell) with an unfavorable Zacks Style Score of D for both Value and Growth.  And why not?

Amazon is pricey. At the time of writing, its PEG ratio of 2.34X is almost double the industry average. Its forward P/E ratio is as high as 57.88X versus the industry average of 33.24X. Earnings yield is same as the industry average. Debt/equity ratio is higher than the industry average.

In fact, some Amazon-heavy consumer discretionary ETFs, including ProShares Online Retail ETF ONLN, Consumer Discretionary Select Sector SPDR Fund XLY, Fidelity MSCI Consumer Discretionary Index ETF FDIS, Vanguard Consumer Discretionary ETF (VCR) and VanEck Retail ETF RTH, lost heavily last week.  ONLN, XLY, FDIS, VCR and RTH were off 5.3%, 5.9%, 6.5%, 6.3% and 5.1% last week. These ETFs have lost 10.2%, 9.1%, 10.1%, 9.9% and 8.2%, respectively, this year.

Time for Reopening Stocks and ETFs?

Rising rates have been a key drag for the growth and tech-oriented stock Amazon. Since the growth sector relies on easy borrowing for superior growth and its value depends heavily on future earnings, a rise in long-term yields cuts the present value of companies’ future earnings.

Apart from the rate issues, the economic reopening amid vaccination and easing Omicron concerns have been pushing investors away from stay-at-home tech and online stocks. Bad news from two pandemic winners – Peloton PTON and Netflix NFLX – also cemented the fact about changing trends. Netflix expects to add a meager 2.5 million users in the current quarter, well below the estimates. Peloton, meanwhile, is cutting costs to tackle the falling demand for its stationary bikes.

Consumers Are Steady: They Are Moving Out

Per a Reuters article, big U.S. banks believe that the current spending patterns indicate consumers’ prosperity. Healthy consumers having cash in the bank, are looking forward to spending as well as borrowing. However, they are now moving out. The below-mentioned example demonstrates the fact.

Foot traffic at the top 10 coffee chain performers was up 2.8% compared to two years ago in June 2021, Placer.ai found out (per a Yahoo Finance article), but dining visits were off 4.6%. But in November, the coffee space witnessed an 8.4% jump in foot traffic compared with the 2019 levels, while December experienced a surge of 7.5% despite Omicron.

Against this backdrop, below we highlight a few reopening-oriented consumer discretionary ETFs that could be up for gains now. These ETFs fared better than the Amazon-heavy ETFs last week as well as so far this year.

Winning Consumer Discretionary ETFs in Focus

ETFMG Travel Tech ETF AWAY – Down 1.54% Last Week; Down 3% YTD

ALPS Global Travel Beneficiaries ETF JRNY – Down 3.4% Last Week; Down 4.3% YTD

Defiance Hotel Airline and Cruise ETF CRUZ – Down 4.6% Last Week; Up 0.4% YTD

SonicShares Airlines, Hotels, Cruise Lines ETF TRYP – Down 5.3% Last week; Down 0.7% YTD

VanEck Gaming ETF BJK – Down 0.2% Last Week; Down 3.6% YTD

(We are reissuing this article to correct a mistake. The original article, issued on January 24, 2022, should no longer be relied upon.)

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