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Three ETFs To Play Amazon's Buying Binge

NEW YORK ( TheStreet) -- As technology companies continue to generate and hoard cash, some, like Amazon (AMZN - Get Report), are looking at acquiring others to broaden offerings paving the road to prosperity for the Internet HOLDRs (HHH), the Retail HOLDRs (RTH), and the PowerShares NASDAQ Internet (PNQI) exchange-traded funds.

Amazon, which was sitting on cash and short-term securities of $5.9 billion at the end of September, has reached an agreement to buy Quidsi, owner of Diapers.com and Soap.com. Furthermore, the Seattle based online retailer recently bought Woot.com, a site that offers a daily discounted item and has agreed to purchase BuyVIP, a fashion site, which will expand its presence in Europe.

The acquisition of Quidsi will allow Amazon to penetrate a market of parents who have young children that use diapers and offers the ability to have this necessity delivered directly to the consumers' front door. Additionally, the acquisition will take out a competitor in the e-commerce space making Amazon that much stronger.

At the end of the day, it appears that Amazon is utilizing its cash reserves to acquire firms, lessen competition, strengthen its market share in the e-commerce space and compete with retail giants Wal-Mart (WMT - Get Report) and Target (TGT - Get Report).

Here are the ways to play Amazon:

  • Internet HOLDRs allocates 40.23% of its assets to Amazon, while also giving ample exposure to eBay (EBAY) and Yahoo! (YHOO - Get Report);
  • Retail HOLDRs allocates 11.44% of its assets to Amazon and also includes Wal-Mart and Target in its top holdings;
  • PowerShares NASDAQ Internet allocates 8.65% of its assets to Amazon and gives ample exposure to Google (GOOG - Get Report) and Chinese Internet search engine giant Baidu (BIDU - Get Report).

Written by Kevin Grewal of SmartStops in Houston.

Grewal has no positions in the securities mentioned.

Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net , where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.

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SYM TRADE IT LAST %CHG
PNQI $72.02 -1.32%
AMZN $422.91 -0.03%
BIDU $193.11 -5.20%
GOOG $531.98 -1.60%
TGT $79.33 -1.10%

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