Four ETFs To Play The Surge In E-Commerce (RTH, PNQI, FDN, HHH, EBAY, PCLN, NFLX, AMZN)

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January 5, 2011 7:27pm AMEX:HHH NASDAQ:PNQI

Over the recent holiday period, the e-commerce sector witnessed exceptional growth as many consumers opted to shop on-line, as opposed via the traditional brick and mortar storefronts,


 paving the path to opportunity in the near future for the sector. 

According to a recent article in Barron’s, U.S. e-commerce spending accelerated 13% during the holiday season, pushing total e-commerce growth in 2010 to 10% year-over-year.  Furthermore, the article also contends that US e-commerce is expected to witness another 10% year-over-year growth in 2011, pushing spending to over $150 billion for the year. 

Additional support to e-commerce should also come from increased consumer spending which is likely to be driven by an improving US economy and governmental decisions which is expected to lead to increased disposable income.  The US economy is showing signs of growth indicated by the recent rise in the Institute for Supply Management’s non-factory index, which constitutes nearly 90 percent of the economy, to a 57.1, signaling growth, and also indicated that measures of new orders and business activity increased to their highest levels since August 2005.  Further support in the US economy came from a report today from ADP Employer Services indicating that companies increased payrolls in December by 297,000, the most since records began in 2001.  These positive trends in the US economy are likely to boost consumer confidence and hence consumer spending. 

In regards to increased disposable income for consumers, the extension of the Bush-era tax cuts as well as the trimming of payroll taxes are both expected to increase disposable income and hence give consumers the ability to increase spending and with current trends, companies that are involved in e-commerce should bode well.

Some ETFs to play the e-commerce trend include:

  • Internet HOLDRs (NYSE:HHH), which allocates a whopping 42.13% to Amazon (NASDAQ:AMZN), the current leader in e-commerce and 18.45% to e-Bay (NASDAQ:EBAY), another company that is heavily involved in the space.
  • First Trust Dow Jones Internet Index (NYSE:FDN), which boasts Amazon, eBay and Priceline (NASDAQ:PCLN) in its top holdings.
  • PowerShares NASDAQ Internet (NYSE:PNQI), which similar to the HHH and FDN boasts as its top holding and also includes Netflix (NASDAQ:NFLX) in its top holdings.
  • Retail HOLDRs (NYSE:RTH), which is a diversified play on the retail sector and allocates 11.88% of its assets to Amazon.

Written By Kevin Grewal From ETF Tutor  Disclosure: No Positions 

Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor’s degree from the University of California along with a MBA from the California State University, Fullerton. He is a contributing author on The Street – his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville.


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