Recover Along With the Online Retail Sector

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

In recent years, more and more shopping has taken place online.

Though some online retailers may have appeared to underwhelm recently due to the decreasing pandemic bump, the overall trend towards shopping from the convenience and comfort of our homes is here to stay. For many investors, looking towards online over brick-and-mortar retailers seems like the only sensible way to invest in the sector.

One tool that can be used to gain exposure to the sector is ProShares Online Retail ETF (ONLN). This exchange-traded fund (ETF) holds a range of companies whose primary business is online, mobile or app-based sales. 

The ETF has a global reach, with the majority of its 26 holdings — 74% — consisting of American companies but with a few entrants from elsewhere, mainly China. The fund’s rules include investing no more than 25% of assets in non-U.S. holdings, so the fund should remain primarily domestic with some global exposure.

ONLN holds $118.78 million in assets. Its expense ratio of 0.58% is somewhat high, as is often the case with relatively specialized funds, but it pays 1% in dividends. The fund’s performance shows that it has returned to pre-pandemic levels after more than doubling in 2020.

Largely as a result of those previously elevated prices, its one-year performance is -57.1%. However, this also means investors need not worry about investing in an industry already at its peak; ONLN has the potential to climb.

Chart courtesy of www.StockCharts.com

Top holdings of ONLN include Amazon.com Inc. (AMZN), 19.22%; Alibaba Group Holding (BABA), 11.31%; eBay Inc. (EBAY), 7.92%; Pinduoduo Inc. (PDD), 5.28%; and Sea Ltd. (SE), 5.22%. The top 10 account for 71% of assets. The holdings tend to be in large companies, with their average weighted market cap rolling in at $315 billion.

For investors interested in the online retail industry despite its recent setbacks, ProShares Online Retail ETF (ONLN) provides a convenient way to allocate assets accordingly.

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