The coronavirus is highlighting what many already knew about the retail sector: it’s good to be operating in the online space while there’s an ongoing weakness for many brick-and-mortar retailers. Investors can play both themes under one roof with the ProShares Long Online/Short Stores ETF (NYSEArca: CLIX).
CLIX tracks the ProShares Long Online/Short Stores Index, which combines two specialized retail indexes into one. It is 100% long the ProShares Online Retail Index, which includes 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. So, the strategy benefits from the decreased foot traffic to traditional brick-and-mortar shops and from the increased reliance on online sales as more people shop at home.
“In the current market environment—with online retailers like Amazon booming and more-traditional retail stores largely closed for business—the fund is in a sweet spot,” reports Gerrard Cowan for the Wall Street Journal. “It tracks a combination of two indexes: the ProShares Online Retail Index and the Solactive-ProShares Bricks and Mortar Retail Store Index. While CLIX is long on the online index, it is short on the bricks-and-mortar index.”
Click on CLIX
E-commerce sales are growing at a rapid pace and undermining in-store retail as consumer habits change and shoppers move online. As popular as they may seem now, online retailers like Amazon and Alibaba only account for about 10% of global retail sales, leaving tremendous room for growth.
Adding to the CLIX case, this year, 8,000 retail stores will be closing in the US. ProShares has seen this trend 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.
Still, online retail has some work to do, though it’s a move to dominance that will be helped by younger generations, according to some experts.
“While the sector is growing at about five or six times the rate of bricks and mortar, there is a long road ahead for online’s growth at the expense of brick-and-mortar retail,” reports the Journal.
CLIX appears to be pricing that moves in. After gaining 4.20% yesterday on a volume that was nearly 50% higher than the daily average, CLIX is higher by almost 37% year-to-date.
For more on core investing strategies, please visit our Core ETF Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.