ETFs On A Roll For Hot Cyber Monday [Amazon.com, Inc., Target Corporation, Wal-Mart Stores, Inc.]

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December 1, 2014 6:39pm NYSE:FDN NYSE:IYC

internet etfsSweta Killa:  The burst of early discounts, long promotional deals, and an improving economy have enticed shoppers to splurge since the start of November. As such, fewer people have shopped in stores or online on Black Friday and Thanksgiving weekend.


As per the National Retail Federation, the numbers from this big four-day holiday weekend is down across the board. The number of shoppers at stores and online have declined 5.2% from last year while total spending fell 11% to $50.9 billion. This trend is expected to continue on Cyber Monday as well. About 126.9 million people are expected to shop online on the day compared to 131.6 million last year. The traffic from home computers will likely outpace mobile devices.

Despite the fact that fewer Americans will shop on this day, the web analytics firm ComScore projects Cyber Monday to be another record-breaking day this year, with online sales likely hitting $2.5 billion. Even Adobe expects Cyber Monday sales to increase 15% from last year to $2.6 billion.

What’s “Hot” On the Wheels

Cyber Monday is the biggest e-commerce sales day of the year. Retailers have kicked in Cyber Monday deals a bit early and are now stretching discounts to what they call, the Cyber Week (November 30–December 6).

The top firm tapping this opportunity is the online behemoth Amazon.com (NASDAQ:AMZN). The company already started offering limited-time deals from November 29 for eight days that change every 10 minutes. In addition, Amazon will offer three special “coveted” deals on Cyber Monday itself.

The traditional brick-and-mortar retailer, Wal-Mart Stores (NYSE:WMT), has doubled its Cyber Week online deals to 500 every day through December 6 with free shipping for orders of $50 or more and slashed the prices of a number of items to half. The company also has a special sales event for Cyber Monday known as ‘Evening Edition’ deals as well as a special Cyber Monday deal that offer savings of up to 90%.

Target Corp. (NYSE:TGT) is also promoting a full Cyber Week with huge discounts on more than 100,000 items including electronics, toys, clothing and household electronics. Among the deals, the most exciting offer is a KitchenAid stand mixer for $224.99, marked down from $449.99. The company is also offering ‘buy one, get one 50% off’ on My Little Pony and Star Wars toys and free shipping on all online purchases between now and December 20.

J.C. Penney (JCP) has more than 50,000 Cyber Monday deals during its “Out-Click St. Nick” sale. Meanwhile, Best Buy (BBY) has the best deals of all when it comes to electronic products with free shipping for orders of more than $35. Apart from these, there are several other retailers like RadioShack (RSH), Kohl’s (KSS), Staples (SPLS – Analyst Report), eBay (EBAY) and Sears (SHLD), which are catching investor eye with sizzling deals and free shipping on most products.

How to Play

Given the attractive deals, investors seeking to tap “Cyber Monday” benefits in a diversified way should focus on the ETFs in the e-commerce corner of the broad retail/tech industry or the broad consumer space. We have highlighted some of them below:

First Trust Dow Jones Internet Index (FDN)

This is one of the popular and liquid ETFs in the broad tech space with AUM of over $1.9 billion and average daily volume of nearly 303,000 shares. The fund tracks the Dow Jones Internet Composite Index and charges 54 bps in fees per year. In total, the fund holds a small basket of 42 stocks with Facebook (FB), Amazon and eBay taking the top three positions with a combined one-fourth share in the portfolio.

From a sector look, the Internet and mobile segment account for 58% of assets, closely followed by Internet retail at 23%. The product gained about 3.8% year to date.

Market Vectors Retail ETF (RTH)

This fund follows the Market Vectors US Listed Retail 25 Index and holds about 26 stocks in its basket with AUM of $119 million. Average daily volume is light under 32,000 shares while the expense ratio is at 0.35%. The product is a large cap centric fund and is heavily concentrated in the top 10 holdings with 63.6% of assets – the largest allocations going to WMT, Amazon and Home Depot (HD).

Sector wise, specialty retail occupies the top position with less than one-third share, followed by double-digit allocation to hypermarkets, departmental stores, drug stores, and health care services. RTH has surged 15.2% so far this year.

iShares U.S. Consumer Services ETF (IYC)

This ETF provides targeted exposure to the domestic consumer services stocks by tracking the Dow Jones U.S. Consumer Services Index. Holding 185 stocks in its basket, the fund is well spread out across general retailers (35.7%), media (27.8%), travel and leisure (21.8%), and food and drug retailers (14.4%). Also, each security makes up for less than 5% share in the basket.

The fund has amassed $535.4 million in its asset base while trades in moderate volume of 69,000 shares a day on average. It charges 43 bps in annual fees from investors. IYC returned 12.5% in the year-to-date time frame.

Bottom Line

The Cyber Monday deals will surely give a boost to online sales this week resulting in soaring stock prices. As a result, investors could find the above-mentioned ETFs a compelling choice to play this week with huge levels of diversification benefits and lower costs. The trio has a Zacks ETF Rank of 3 with a Medium risk outlook.

This article is brought to you courtesy of Sweta Killa.


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