Savings Experiment: Snow Removal
The Money Man Behind Rick Santorum: Who Is Foster S. Friess?
Call it Christmas come early: Last week we learned that stocks posted an average gain of about 9% for March retail sales. We also learned consumer spending in the U.S. rose in March by the most in five months, and many economists are predicting continued spending acceleration as the economy adds more jobs and gets back into the groove.Already we've seen some red hot runs in the retail sector in anticipation of the consumer's return. Several consumer-related exchange-traded funds (ETFs) have been tearing things up on Wall Street lately -- lapping the broader market at least four times over!
There are lots of great individual retail stocks out there -- and no shortage of reasons to buy Walmart (WMT). But the fact is that blue chip retailers can often lag the broader sector, and small-cap retailers can sometimes be too volatile for many investors.
So why not add some easy diversification to your retail investments by going the exchange-traded fund route? To help you along, here are three of the best performing consumer ETFs out there as of Tuesday's market close:
The Rydex Equal Weight Consumer Discretionary ETF (RCD) doesn't really like to play favorites, and there aren't any component stocks that are dramatic leaders in this fund portfolio. Perhaps it's this diversification that has allowed the Rydex fund to ride the consumer trend to impressive gains so far in 2010. Top holdings right now are photo giant Eastman Kodak (EK), department store Sears (SHLD) and USA Today publisher Gannett (GCI), but only by small margins. This ETF will trim back on these positions when it re-balances its holdings.
Overall, RCD has generated about 15% year-to-date. The Dow Jones is up about 3.5% in the same period.
The PowerShares Consumer Discretionary ETF (PEZ) is a good mix of consumer holdings across a variety of sectors and a variety of company sizes. Some top components are direct, such as retailer Nordstrom (JWN), while others are more proxy-type stocks that represent spending in general -- like Sherwin-Williams (SHW). When you think of consumer confidence, you don't necessarily harp on paint demand, but seeing as paint sales correlate directly to home sales or home-improvement budgets, this is a good barometer stock for spending in general.
Overall, PEZ has generated almost 18% year-to-date. Again, the Dow is up about 3.5%
The Vanguard Consumer Discretionary ETF (VCR) is more of a big-name consumer play that is full of component stocks you're sure to recognize, like Amazon.com (AMZN) and McDonald's (MCD). This is the blue-chip way to play spending via exchange-traded funds. But don't think just because these top constituent companies are large-caps that the VCR fund is sluggish. It has delivered impressive gains so far in 2010 and continues to look up.
Of course, there are a lot of attractive component stocks in this ETF. For instance, there are many reasons MCD is a good stock to buy right now. But this ETF is up 16% since January 1, 2010. MCD is up only about 12%.
So if you want to play the retail sector, the numbers show these three funds have a lot to offer. It's hard to believe, but consumer spending may already top the 2008 peak before the market slump. Really! That means investors should seriously consider some type of retail play to benefit from these trends.
As of this writing, Jeff Reeves did not own positions in any of the ETFs or individual stocks named here.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
