ETF Trends CEO Tom Lydon discussed the ProShares Long Online/Short Stores ETF (CLIX) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
CLIX seeks investment results, before fees and expenses, that correspond to the performance of the ProShares Long Online/Short Stores Index.
The ProShares Long Online/Short Stores Index combines two specialized retail indexes into one. It is 100% long the ProShares Online Retail Index, which tracks retailers that primarily sell online or through other non-store channels, and 50% short the Solactive-ProShares Bricks and Mortar Retail Store Index that brings together traditional in-store retailers. The positions are rebalanced monthly.
As Lydon explains in the podcast episode, this ETF is a strong one, with a good message regarding retail shopping. With that in mind, a couple of reasons help CLIX stand out.
“Only 10% of retail shopping is online,” Lydon states, “So we really have a huge amount of upside in the years to come.” However, malls and big box stores have been struggling. Compared to the past, when the mall was the place to be for all sorts of needs, wants, and fun, people today are different.
“People don’t go shopping as much,” Lydon makes clear. While stores like Target (NYSE: TGT) and Walmart (NYSE: WMT) are doing okay because they can sell a wide variety of products in stores and online, others are not so fortunate. Macy’s and Barnes & Noble, for example, have a specialized focused, and the clientele has faded, resulting in the closing of many stores.
What’s Happening With Retail Stores
This year, 8,000 retail stores will be closing in the US. ProShares has seen this trend, as Lydon explains and as was mentioned above, and an ETF was created that’s 100% long online, and 50% short for the major retailers that do not seem to be able to support themselves in today’s online-driven consumer markets.
To clarify, while there are ETFs that act similarly as far as REIT allocations, but CLIX is focused explicitly on brands and retailers.
Lydon brings up Michaels as an example. While the craft store may or may not be doing as well when it comes to how these types of products sold online, but because there can be an understanding of trends in the retail space, ProShares has constructed 48 short companies and 25 long. The idea will be that the upward trend in online retail can be captured, with profits coming out of that struggle the big box brands face.
“With that,” Lydon begins, “This ETF is up over 25% year-to-date, compared to the S&P that’s up 18%. And, the largest traditional retail-related ETF is actually down 1.5%.” This shows how a long ETF that has a short component that’s worked pretty well with its strategy.
Jaffe brings up the possible recession that’s on the way, which would result in lower consumer spending. Applying that to this discussion, Lydon suggests online retail is going to increase over time, regardless of a recession, and probably at a fast rate.
Additionally, Lydon notes, “If you look at consumer staples, those continue to do well, even in recessionary times.” A lot of this has to do with consumer preferences. Lydon points out how it’s easy for him to get bulk items online while going for more specific products by visiting various retail markets.
Lydon doesn’t disagree that a recession will likely have an effect, but the trends will continue to develop.
Listen to the full podcast episode on CLIX ETF:
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