Issuers of exchange traded funds have not yet seen fit to bring to market a dedicated restaurant ETF, which is shame considering that restaurant stocks have been important drivers of the consumer discretionary sector’s recent resurgence.
That does not mean investors lack for viable ETF options for gaining decent exposure to restaurant stocks. The PowerShares S&P SmallCap Consumer Discretionary Portfolio (NasdaqGM: PSCD) acts nicely in lieu of a dedicated restaurant ETF.
PSCD, which tracks consumer discretionary sectors from the S&P SmallCap 600 Index, allocates 30% of its weight hotel, leisure and restaurant stocks, making that group the ETF’s largest industry weight. However, restaurant stocks are the largest component of PSCD’s leisure spending exposure with such names representing 13 of the ETF’s 95 holdings. [Small-Cap Consumer ETF Advantage]
Notably, high-flying Jack in the Box (NasdaqGS: JACK) is PSCD’s largest holding at a weight of almost 3.5%. PSCD, along with its stablemate, the PowerShares Dynamic Food & Beverage Portfolio (NYSEArca: PBJ) is one of a scant number of ETFs that features Jack in the Box among its top 10 holdings. With that stock flirting with all-time highs and having crushed even Chipotle (NYSE: CMG) over the past several years, robust JACK exposure is a positive trait for an ETF to have. [A Jack in the Box ETF]
The other restaurant stocks in PSCD’s top 10 lineup – Buffalo Wild Wings (NasdaqGS: BWLD), Cracker Barrel (NasdaqGS: CBRL) and Texas Roadhouse (NasdaqGS: TXRH) – are up an average of 15% over the past 90 days. PSCD also offers exposure to recovering household durables names.
“Household durables also make up 11% of PowerShares S&P SmallCap Consumer Discretionary Portfolio (PSCD). Smaller companies such as household appliance company iRobot (IRBT) and homebuilder Ryland Group (RYL) are among those in the ETF,” said S&P Capital IQ.
The consumer discretionary sector has a 0.06 correlation to Treasury yields compared to -0.5 for utilities, according to J.P. Morgan data. Additionally, discretionary is expected to be one of just two sectors to show double-digit dividend growth this year. Financial services is the other.
PowerShares S&P SmallCap Consumer Discretionary Portfolio