The PowerShares Dynamic Retail Portfolio (NYSEArca: PMR) is not the largest retail exchange traded fund, but the fund does offer something different (and respectable returns) compared to its cap-weighted an equal-weight rivals.
Up 6.6% year-to-date, PMR tracks the Dynamic Retail Intellidex Index. Confirming that the almost 10-year old ETF is different than its rivals, the Dynamic Retail Intellidex Index “evaluates companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value,” according to PowerShares.
That is a methodology that has well-served the PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP) and the PowerShares Dynamic Biotechnology & Genome Portfolio (NYSEArca: PBE), among other PowerShares industry ETFs.
PMR represents a conservative play on retailer as several of its top 10 holdings, including Walgreens Boots Alliance (NYSE: WAG), Costco (NasdaqGS: COST), Wal-Mart (NYSE: WMT) and CVS (NYSE: CVS) are classified as consumer staples names. Overall, staples stocks account for 43% of PMR’s weight. [Checking in on Staples ETFs]
PMR does offer some exposure to apparel and home improvement retailers, two sub-sectors of the retail industry S&P Capital IQ is bullish on. PMR allocates nearly 5% of its weight to Lowe’s (NYSE: LOW).
Home improvement retailers “will likely experience mid-single digit revenue growth in the next fiscal year according to S&P Capital IQ Equity Analyst Efraim Levy, driven by new store additions and the benefits of a recovery in the housing market and improving consumer confidence,” said the research firm in a new note.
Analysts believe that the better-than-expected sales are a sign that the lower gasoline prices, improving job market and stronger economy are pushing consumers to spend more, which could continue throughout this year. Additionally, confidence looks even better among lower-income groups, which suggests that low gas prices and low mortgage rates are also allowing consumers to buy more goods. [Retail ETFs Rebound]
S&P Capital IQ has a marketweight rating on PMR. The research firmthinks industry ETFs can incur elevated risk that investors may not want. As such, investors may want to look at more diversified consumer discretionary ETFs to gain exposure to specialty retail trends.”
PowerShares Dynamic Retail Portfolio
