Amazon.com Inc. (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX) truly meet the definition of “story stocks.”
The gains delivered by these stocks this year and in recent years have been nothing short of staggering, but the performance of these stocks also serves as a reminder to investors using exchange traded funds as proxies on these stocks.
The reminder is that if you’re an investor that wants to use ETFs to access Amazon and Netflix, don’t buy a traditional technology ETF because Amazon and Netflix are not classified as technology stocks.
Investors should turn to consumer discretionary ETFs, such as the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY), for large Amazon exposure in the ETF wrapper. Amazon’s surge is important to XLY and cap-weighted consumer discretionary ETFs because Amazon is the largest holding by wide margins in these ETFs. In fact, only a handful of S&P 500 members sport larger market caps than Amazon.
Rivals to XLY include the Vanguard Consumer Discretionary (NYSEArca: VCR) and Fidelity MSCI Consumer Discretionary Index (NYSEArca: FDIS). Like XLY, those are cap-weighted ETFs. As such, they feature substantial Amazon allocations.