The holiday shopping season is here, and this is usually the time of year that many investors give a closer look to retail stocks and exchange traded funds.
Investors applying the holiday shopping thesis to retail stocks might not want to delay because the VanEck Vectors Retail ETF (RTH) is higher by 24.73% year-to-date after closing around all-time highs on Tuesday. Adding to the near-term case for RTH are some compelling retail sales forecasts.
“According to Kevin Brown, Morningstar’s real estate equity analyst, total retail sales for the fourth quarter of 2021 are projected to rise by 9.5% as compared with this time last year. This comes on top of strong retail sales seen in the fourth quarter of 2020, which were up over 6% from 2019,” says Morningstar analyst Dave Sekera.
The $249 million RTH follows the MVIS Listed Retail 25 Index. As the benchmark’s name implies, RTH is home to 25 stocks, and while that’s a concentrated lineup, the VanEck fund features a solid mix of online, brick-and-mortar, and apparel retailers.
“Last year, e-commerce sales surged an eye-popping 32% as the impact of social distancing and shutdowns limited in-person shopping,” notes Sekera. “The amount of foot traffic across retail categories plunged in early 2020 and only returned to pre-pandemic levels this summer.”
While this should be a very cheery holiday season for online retailers, malls and land-based retailers are roaring back, and that’s a catalyst for RTH. The fund allocates over 30% of its weight to Home Depot (NYSE:HD), Lowes (NYSE:LOW), Costco (NASDAQ:COST), and Walmart (NYSE:WMT).
After an unusual 2020 holiday season caused by the coronavirus pandemic, many consumers want to get back to normal and head to malls and brick-and-mortar stores. That doesn’t mean that e-commerce, which is still growing rapidly, is going to fall by the wayside, however. Investors can bet that online retail will remain a focal point of the 2021 holiday shopping season.
“We are forecasting that total e-commerce sales will grow by 10.4% in the fourth quarter. The pandemic has accelerated the ongoing evolution of how consumers make their purchasing decisions and where those sales occur,” adds Morningstar’s Sekera.
That’s good news for RTH because Amazon (NASDAQ:AMZN), the largest e-commerce company in the U.S., is by far RTH’s largest holding; the VanEck ETF devotes almost 19% of its weight to the company.
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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.