SPDR S&P Retail ETF (XRT)
XRT holds a number of typical “mall” stores — Foot Locker (FL), Men’s Wearhouse (MW), TJX Cos. (TJX) and the like — but also other retailers such as Amazon (AMZN) and Advance Auto Parts (AAP), and even companies you wouldn’t associate with retail, including Netflix (NFLX) and Priceline (PCLN).
More importantly, the fund is equally weighted, so no particular stock has a heavy effect on XRT’s performance. Heck, Rite Aid (RAD) is XRT’s biggest holding at just 1.63% of the fund.
Consumer Discretionary SPDR (XLY)
The Consumer Discretionary SPDR isn’t specifically geared toward retail like XRT is, so it’s at least leaning well away from the food court.
XLY also is cap-weighted, so it boasts 5%-plus holdings in larger retailers like Amazon and Home Depot (HD), as well as other discretionary (but non-retail) stocks such as Comcast (CMCSA) and Walt Disney (DIS).
Market Vectors Retail ETF (RTH)
Meanwhile, RTH is extremely heavily weighted in larger, more stable companies — Amazon, Walmart (WMT), Home Depot, Walgreen (WAG) and CVS Caremark (CVS) make up a whopping 35% of the fund. So, yes, you’re overweight in a few companies, but they’re at least stocks you can depend upon not to drop 20% at the drop of a hat.
Click to Enlarge Investors have every reason to be scared of retail right now. Stocks are dropping like flies, and the data that’s pouring in doesn’t bode very well for many of the sector’s biggest names. And, in fact, those woes could even pour over into the Amazons and Walmarts of the world.
Meanwhile, a couple of these funds are toying with near-term technical support, and any breaks could spur additional selling.
So rather than buying near the top right now, you might consider waiting for even deeper discounts than the 2% to 3% these funds have shed in the past few days.
But long-term, retail ETFs are a great buy for anyone even remotely optimistic about the U.S. economy. So dig in.