Big Differences In Retail ETFs

July 19, 2019

As we wrap up a two-day shopping spree called Amazon Prime Day(s), all eyes are on Amazon stock prices, now up 33% in 2019, nearing one-year highs.

The big sales event at Amazon came in the same week another strong round of retail sales numbers hit the market, showing that consumers are spending their discretionary money. And consumer spending is a key driver of economic growth.

Accessing Amazon—and more broadly, the retail segment—is easy through ETFs. But choices in this segment are delivering very different results.

There are 223 ETFs today that own Amazon stock to varying degrees. From consumer discretionary funds to retail ETFs to trend-following and even a covered-call strategy, there are plenty of vehicles offering a slice of Amazon action.

 

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

 

In our ETF Stock Finder tool, by entering the company’s ticker symbol “AMZN” in the search bar, you will quickly find a comprehensive list of ETFs that own Amazon, led by the Fidelity MSCI Consumer Discretionary Index ETF (FDIS).

Biggest ETF Holder Of Amazon

FDIS currently has the biggest allocation to Amazon of any ETF in the market—Amazon represents 26% of the FDIS portfolio. That means price movements in Amazon stock have a big impact on this ETF’s overall returns. At a 26% weighting, Amazon is a major driver of performance in FDIS.

Among retail-focused ETFs, there are big allocation differences to Amazon—and other retailers—that have led to disparity in performance.

Consider the two popular retail ETFs: the SPDR S&P Retail ETF (XRT) and the VanEck Vectors Retail ETF (RTH). RTH allocates 20% of its portfolio to Amazon. XRT allocates only 1.3% to the company.

That big difference in allocation is linked to methodology. Both funds look to capture the U.S. retail segment, but RTH is a market-cap-weighted portfolio. The 25 largest U.S.-listed retail names—the biggest retail companies—have the most presence in this portfolio. XRT, on the other hand, tracks an equal-weighted index of retail stocks, diluting any single-stock impact on overall returns.

 

 

In a year when Amazon is up 33%, that strong performance is captured more prominently in RTH than in XRT. The chart below shows that RTH has now delivered about 4x the returns of XRT this year:

 

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