ETF Chart of the Day: Retreating Retail

Earnings season is becoming top of mind in some sectors as we head through this January, and the Retail sector stands out specifically to us thanks to trading action from yesterday ahead of this morning’s Retail Sales number release.

In the largest U.S. Equity focused fund that hones in on the Retail sector, XRT (SPDR S&P Retail, Expense Ratio 0.35%), more than 6 million shares traded (versus average daily volume of about 3 million shares) yesterday, and the fund has seen more than $240 million leave via redemption activity lately. With about $940 million in overall assets in the fund, the size of the outflows is certainly worth taking note.

We will remind readers that we note similar sized flows from time to time in XRT on both sides of the market (buyers and sellers), as the ETF is very popular among managers that like to tactically trade the Retail space.

Upticks in activity lately are not relegated to XRT, as the second largest ETF in the space, RTH (Market Vectors Retail, Expense Ratio 0.35%) which has about $40.8 million in assets under management, is also trading rather heavily lately (more than 300k shares traded yesterday versus ADV of about 33,000 shares) but we have not seen any accompanying asset flows in the marketplace just yet.

When we break down exactly what is inside these two ETFs closer, we see that RTH is very slanted toward mega and large cap Retail names (93% of the portfolio lies there), and the heaviest individual weightings are to WMT (10.42%), HD (9.46%), AMZN (7.94%), and CVS (5.83%). AMZN as a weighting may surprise some, as of course it is not your traditional brick and mortar retailer but instead online based, and no one has complained about the stock’s performance lately, that’s for sure (trading with a $395 handle today and was as high as $406.89 on an intraday basis last week).

XRT has a much different look and feel to it than RTH however, in that the portfolio is equal weighted and not market cap weighted, and re-balanced periodically to keep it as close to equal weighted as possible, so there is much less security specific risk/exposure.