Ringing in Retail with This Fund

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.
[Woman in Santa hat with bag of gifts]

Ringing in the holidays often comes in tandem with “ringing the register” in retail.

So, now is the perfect time to try to ring in profits from retail sales with the SPDR S&P Retail ETF (XRT). XRT offers investors exposure to the U.S. retail industry, which is a sub-sector of the consumer discretionary arena.

Unlike many of its peers, the fund uses an equal-weighting method instead of market-cap weighting. That distinction gives XRT an upper hand in terms of performance and exposure.

Since XRT does not base its selections on market-cap weighting, it attracts retail stocks, as defined by the Global Industry Classification Standard (GICS), from the overarching S&P Total Market Index that include retail companies of all capitalization. As a result, XRT has more individual holdings than some of its competitors and can avoid concentration in a few big-named companies.

The fund consists of a wide variety of retail companies that span multiple sub-industries, some of which include apparel, auto, computers and electronics, department stores, food, general merchandise stores, specialty stores and direct market retail. While this fund may be too targeted for investors looking for buy-and-hold investments, it has potential for those looking to implement a sector-rotation strategy or overweight more volatile arenas of the stock market.

XRT has $531 million in assets under management. The fund has a fairly low expense ratio of 0.35%, which is more appealing than some of its peers. XRT offers a 2.69% dividend yield and a price-to-earnings ratio of 2.28.

Courtesy of Stockcharts.com

As is visible from its chart, XRT started the year on a downward slide but began an upward climb in late July. Since then, the fund has continued to gain momentum and opened on Wednesday, Nov. 16, at $64.98.

The fund’s top 10 holdings include Carvana Co Class A (CVNA), 1.60%; Etsy Inc. (ETSY), 1.49%; Dick’s Sporting Goods Inc. (DKS), 1.46%; Sonic Automotive Inc. Class A (SAH), 1.34%; National Vision Holdings Inc. (EYE), 1.33%; Foot Locker Inc. (FL), 1.32%; BJ’s Wholesale Club Holdings Inc. (BJ), 1.30%; Murphy USA Inc. (MUSA), 1.30%; Chewy Inc. (CHWY), 1.28% and Hibbett Inc. (HIBB), 1.28%.

XRT is an equal-weighted fund that tracks companies of all market capitalizations. It holds a wide variety of stocks ranging from apparel companies to specialty stores and automotive companies. With a modest expense ratio, it is more affordable than similar funds.

While it’s still working on regaining its market strength, XRT could be a great opportunity for aggressive investors to buy at its reduced price. As with any opportunity, potential investors should conduct their own due diligence to decide if this fund fits their individual investing needs and portfolio goals.

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