Americans’ shifting preferences and desire to spend on experiences, including dining out, could support the consumer services and restaurant industries, along with sector-related exchange traded funds.
On the upcoming webcast, How Your Portfolio Could Bite Into Consumer Spending, Samuel Masucci, Founder and CEO of ETF Managers Group, and Michael Cronan, President of BITE ETF, will take a look at the strengthening group of the restaurant and consumer services industry, along with ways for advisors to capitalize on the growth.
The hospitality group’s growth may reflect consumer’s changing preferences. Data from JPMorgan Chase Institute revealed that people are spending on experiences rather than shopping. Specifically, most consumers were spending money on restaurants and “other services,” forgoing durable goods and choosing small- and medium-sized businesses over larger ones.
Related: Take a BITE out of a Restaurant ETF
According to the U.S. Census Bureau data on the U.S. retail sector, restaurant & bar sales now eclipse grocery story sales.
[related_stories]Meanwhile, restaurants may also enjoy wider margins as costs fall along with commodity prices. Over the second quarter, food costs on average were 15% lower year-over-year, the fourth consecutive quarter of double-digit deflation compared to the previous year-ago period.
Related: Lower Food Costs May Boost Restaurant ETF This Earnings Season
Investors can capitalize off the growing industry through a sector-specific option, the Restaurant ETF (NasdaqGM: BITE), a dedicated restaurant-related ETF. The ETF includes exposure to many eateries, with top components including Arcos Dorados Holdings (NYSE: ARCO) 3.0%, Dave & Busters (NasdaqGS: PLAY) 2.9%, El Pollo Loco (NasdaqGS: LOCO) 2.9% and Dominos Pizza (NYSE: DPZ) 2.6%.
BITE also equally weights components so the fund may have a larger tilt toward smaller companies.
“An equal-weighted approach helps to minimize the outsized impact that a few mega-cap restaurant operators can have on more traditional, market cap-weighted indexes,” according to BITE. “For example, under BITE’s methodology, small but faster-growing companies like The Habit Burger and Shake Shack receive the same weighting as a global giant like McDonald’s.”
Financial advisors who are interested in learning more about the consumer services industry can register for the Tuesday, July 19 webcast here.