Traditional retail stocks and the relevant exchange-traded funds have faced plenty of controversy. While the holiday shopping season may provided some temporary relief to brick-and-mortar retailers, it's evident at least one ETF is emerging as the preferred way to play the retail sector.
The Amplify Online Retail ETF IBUY jumped 1.4 percent Thursday, extending its year-to-date gain to over 45 percent on its way to another record high. IBUY is up about 45 percent this year while the brick-and-mortar heavy SPDR S&P Retail ETF XRT, the largest retail ETF, is up barely more than 1 percent.
IBUY's stellar performance isn't heavily attributable to the giants of e-commerce, such as Amazon.com, Inc. AMZN, eBay Inc. EBAY and Netflix, Inc. NFLX. In fact, none of those stocks are among IBUY's top 10 holdings and the trio combines for less than 10 percent of the ETF's weight.
IBUY Requirements
IBUY, which debuted in April 2016, tracks the EQM Online Retail Index. That benchmark mandates that member firms derive 70 percent or more of their revenue from online sales. In other words, IBUY is uniquely positioned to benefit from the move to online shopping and days such as Cyber Monday when shoppers spent $6.6 billion.
The ETF holds 39 stocks, the largest of which commands a weight of nearly 4.8 percent. IBUY's top 10 holdings include Carvana Co CVNA, Lands End, Inc. LE, Etsy Inc ETSY and Grubhub Inc GRUB.
IBUY is a compelling long-term idea, perhaps the most compelling among the existing retail ETFs. As Amplify notes, online retail sales have jumped 2,000 percent since 1999, but accounted for less than 9 percent of U.S. retail sales last year.
Supportive Data
The death of brick-and-mortar retailers will be continually debated, but there's no debating shoppers are moving online and doing so in significant fashion.
“Global online retail sales continue to rise, and that trend is expected to continue. Consider that global online sales were $1.5 trillion in 2015 and are projected to be $4.1 trillion in 2020,” according to Amplify.
Investors are taking as IBUY has added almost $45 million of its $158 million in assets under management just since the start of the fourth quarter. Year-to-date inflows for IBUY are north of $134 million.
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