The Zacks Analyst Blog Highlights: Home Depot, J. C. Penney, SPDR S&P Retail ETF, Market Vectors Retail ETF and PowerShares Retail Fund
For Immediate Release
Chicago, IL – November 21, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Home Depot (HD-Free Report), J. C. Penney (JCP-Free Report), SPDR S&P Retail ETF (XRT- Free Report), Market Vectors Retail ETF (RTH- Free Report) and PowerShares Retail Fund (PMR- Free Report).
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Here are highlights from Thursday’s Analyst Blog:
Retail ETFs Gain Ahead of Holiday Season
Retailers are gearing up for this holiday season encouraged by an improving economy, positive investor sentiments, falling oil prices and better corporate earnings. This is especially true as retailers saw a mediocre Q3 with total earnings from 90.9% of the sector’s total market capitalization reported so far being up 1.8% on 5.8% revenue growth.
Though the increase in both earnings and revenues is slightly lower than respectively 2% and 5.9% recorded in Q2 for the same group of companies, earnings surprises were predominantly encouraging with 67.6% of the companies beating earnings estimates and 63% beating revenues. Earnings have been solid, leading to surging stock prices and bullishness in the broad retail sector (read: Can a Great Holiday Season Rally These Retail ETFs?).
However, the sliding stock price of Home Depot (HD-Free Report) despite robust results as well as muted results from some retailers such as J. C. Penney (JCP-Free Report) has put some barriers to the outperformance of the retail space. As a result, the retail sector has been the second weakest among the 16 Zacks sectors in terms of the price impact of Q3 results. The retail sector stocks in the S&P 500 are down by an average of 0.29% versus 0.95% gain for the S&P 500 in response to earnings announcements.
ETFs in Focus
Improved earnings and the festive mood are driving the retail space and ETFs higher. Investor could easily tap any decline in stock prices resulting from soft earnings through ETFs. Below, we have highlighted three ETFs that are in focus for the upcoming holiday season. Any of these could be solid picks for investors given that these have a favorable Zacks ETF Rank of ‘2’ or ‘3’ with a Medium risk outlook and improving fundamentals.
SPDR S&P Retail ETF (XRT- Free Report)
This product tracks the S&P Retail Select Industry Index, holding 104 securities in its basket. It is widely spread across each component as none of these holds more than 1.26% of total assets. Small cap stocks dominate more than half of the portfolio while the rest have been split between the other two market cap levels.
In terms of sector holdings, apparel retail takes the top spot at one-fourth share while specialty stores, automotive retail, and Internet retail also have double-digit allocations. The fund has amassed about $926 million in its asset base and trades in heavy volume of nearly 2.1 million shares per day. The ETF charges 35 bps in annual fees and has added over 3% over the past 10 trading sessions. The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating.
Market Vectors Retail ETF (RTH- Free Report)
This fund follows the Market Vectors US Listed Retail 25 Index and holds about 26 stocks in its basket with AUM of $106 million. Average daily volume is light at under 30,000 shares while expense ratio is at 0.35%. The product is a large cap centric fund and heavily concentrated on the top 10 holdings with 63.6% of assets.
Sector wise, specialty retail occupies the top position with less than one-third share, followed by double-digit allocation to hypermarkets, drug stores, departmental stores and health care services. RTH gained 5.4% over the past 10 days and has a Zacks ETF Rank of 3 or ‘Hold’ rating (read: A Comprehensive Guide to Retail ETFs).
PowerShares Retail Fund (PMR- Free Report)
This retail fund provides diversified exposure across various market caps with 42% in small caps, 41% in large caps and the rest in mid caps. This is easily done by tracking the Dynamic Retail Intellidex Index. The fund has accumulated just $19.8 million in its asset base while trades in light volume of under 10,000 share a day. The ETF charges 63 bps in fees per year.
In total, the product holds 30 securities with moderate concentration of 47.4% across the top 10 holdings. In terms of industrial exposure, specialty retail takes the top spot at 36%, while food retail (19%) and hypermarkets (13%) round off the top three positions. PMR gained about 3% in the past 10 trading sessions and has a Zacks ETF Rank of 3.
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