With the consumer discretionary sector ranking as one of this year’s best-performing sectors, investors may want to consider a more tactical approach to the group as the third quarter winds to a close.
An idea to consider is the PowerShares Dynamic Leisure and Entertainment Portfolio (NYSEArca: PEJ), which includes restaurant names.
“Restaurants are a highly discretionary category, and continued strength suggests that households are not too worried about higher gas prices and that tax cuts are providing a cushion,” Morgan Stanley economists said in a note.
PEJ, which turned 13 years old in June, targets the Dynamic Leisure & Entertainment Intellidex Index. That benchmark “is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value,” according to Invesco.
In other words, PEJ is a smart beta alternative to traditional cap-weighted consumer cyclical funds.
Why Now For PEJ
On a historical basis, PEJ is one of the best-performing non-leveraged ETFs in the month of September.
“Among the best exchange-traded funds (ETFs) to own in September is the Invesco Dynamic Leisure and Entertainment ETF (PEJ) — which features airline stocks, casino stocks, and GrubHub Inc (NYSE:GRUB) among its top holdings. What’s more, GRUB is eyeing its longest win streak in years, and now could be time to buy calls on the red-hot stock,” reports Schaeffer’s Investment Research.
Of the top 11 non-leveraged ETFs in terms of September performances, five have significant consumer discretionary exposure. PEJ holds 29 stocks, about 60% of which are classified as growth names.
“Food delivery concern GRUB is among the top 10 PEJ holdings, representing 3.93% of the fund. The shares have been on a tear lately, doubling in 2018 and touching a record high of $145.07 out of the gate today. What’s more, GrubHub stock is on pace for a ninth straight win, which would mark its longest win streak since October 2016,” according to Schaeffer’s.
PEJ is up nearly 6.70% year-to-date.
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