Top ETF Deals For This Holiday Season

The holiday season is off to a great start this year buoyed by a digital shopping boom. More Americans have tuned to Internet and a burst of online deals ranging from apparel to flat-screen TVs that led to a decline in traffic at brick-and-mortar stores.

Fast Recap of Thanksgiving Weekend & Cyber Monday

Per the latest data from National Retail Federation (NRF), more than 165 million Americans shopped in stores or online during the Thanksgiving weekend (from Thanksgiving through Cyber Monday), slightly higher than the pre-holiday prediction of 164 million consumers. Average spending per person over the five-day period was $313.29, with 69% going toward gifts. The biggest spenders were older millennials and Gen Xers (35-44 years old), who shelled out $413.05 on average (read: Best & Worst ETFs of Thanksgiving Week).

The top destinations for shopping over the five-day period were department stores (42%), online retailers (38%), apparel retailers (30%) and grocery stores (30%). Cyber Monday was the most popular day to shop online, while Black Friday was the most popular day to shop in stores. Notably, per NRF, more than 89 million people shopped both online and in stores, up nearly 40% from last year.

According to Adobe (NASDAQ:ADBE) Analytics, online sales jumped 28% to $3.7 billion on Thanksgiving Day and 23.6% to a record $6.22 billion on Black Friday, according to Adobe Analytics. This made Thursday the fastest-growing day for e-commerce sales in history and marked the first Friday after Thanksgiving Day in history to see more than $2 billion in sales from smartphones. About 33.5% of e-commerce sales came from mobile devices compared with 29.1% in 2017 thanks to social media sites such as Instagram, Snapchat and Pinterest. Cyber Monday sales also surged 19.3% to new highs of $7.9 billion.

U.S. on Solid Growth Path

The American economy has been on a solid pace of growth with robust job creation, strong GDP growth, a 50-year low unemployment rate, the fastest pace of wage gains in nearly a decade, and rising consumer and business confidence. Although third-quarter GDP growth slowed to 3.5% from 4.2% in the second quarter amid growing headwinds from trade, they marked the best two-quarter stretch in four years. With this, the economy is on pace for the fastest annual growth in 13 years.

Americans are optimistic about the economy this holiday season. Though the Consumer Confidence Index — a barometer of the U.S. consumer health measured by the Conference Board — fell to 135.7 in November from 18-year high of 137.9 recorded in October, it remains strong (read: Consumer Confidence Slips From 18-Year High: ETFs in Focus).

As a result, NRF expects holiday sales — excluding automobiles, gasoline and restaurants — to grow 4.3%-4.8% for November and December to $717.45-$720.89 billion. This is higher than the five-year average of 3.9% but lower than last year’s growth of 5.3%. Notably, Adobe expects ecommerce sales to rise 14.8% this holiday season to $124.1 billion.

What’s Hot?

Given the holiday optimism and digital shopping boom, stocks in the Internet and retail space look poised for solid gains this month. Investors could tap this opportunity in a diversified way with the help of following ETFs and make the most of the annual shopping event:

SPDR S&P Retail (NYSE:XRT) ETF XRT

This product tracks the S&P Retail Select Industry Index, holding 95 securities in its basket, with none accounting for more than 1.5%. The fund has amassed $695.5 million in its asset base and charges 35 bps in annual fees. Volume is extremely solid, exchanging nearly 6.6 million shares in hand a day on average. The fund has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Amplify Online Retail ETF IBUY

This ETF has attracted $367.1 million in its asset base. It 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 41 stocks that are widely diversified, with each holding less than 4% of assets. The product charges 65 bps in fees per year.

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. Amazon (NASDAQ:AMZN) accounts for the largest share of 24.2% in the portfolio. The product has amassed $31.4 million in its asset base. It currently trades in a paltry volume of around 18,000 shares a day on average. It charges 58 bps in annual fees from investors (read: 5 ETFs Leading the Current Market Rally).

O’Shares Global Internet Giants ETF OGIG

This fund invests in some of the largest global companies that derive most of their revenues from the Internet and e-commerce sectors that exhibit quality and growth potential by tracking the O’Shares Global Internet Giants Index. It holds a basket of 74 stocks with each accounting for less than 7% of assets. OGIG has been able to attract $50.2 million in its asset base since its debut in early June and trades in average daily volume of 69,000 shares. The fund charges 48 bps in annual fees.

ProShares Long Online/Short Stores ETF CLIX

This fund seeks to benefit from both outperforming online and underperforming physical retailers through the long/short strategy. It combines the 100% long position in retailers that primarily sell online or through other non-store channels with a 50% short position in those that rely principally on physical stores by tracking the performance of the ProShares Long Online/Short Stores Index. The approach reduces equity market exposure and results in less volatility than long-only equity strategies. The ETF charges 65 bps in annual fees from investors and trades in average daily volume of 14,000 shares. It has accumulated $47.3 million in its asset base (read: Holiday Season 2018 Should Make This ETF Jump in Joy).

First Trust Dow Jones Internet Index Fund FDN

This fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 42 stocks in its basket with heavy concentration on the top firm — Amazon — at 9.3%, while others account for no more than 7.5% of assets. FDN is the most popular and liquid ETFs in the broad technology space with AUM of $7.8 billion and average daily volume of around 735,000 shares. It charges 53 bps in fees per year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

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