A Retail ETF for Earnings Season - TheStreet

A Retail ETF for Earnings Season

The SPDR S&P Retail ETF offers broad exposure and diversification to the retail sector.
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NEW YORK (

TheStreet

) -- This week's earnings calendar is dominated by big names in the retail industry. Investors looking for the strongest long-term play on these companies should look to the

SPDR S&P Retail ETF

(XRT) - Get Report

.

Before the bell on Tuesday,

Sears

(SHLD)

,

Barnes & Noble

(BKS) - Get Report

,

Macy's

(M) - Get Report

,

Target

(TGT) - Get Report

, and

Office Depot

(ODP) - Get Report

issued earnings reports documenting their performance throughout the most recent quarter. In all, the results have been optimistic. All five firms managed to beat analysts' expectations.

One of the more notable highlights from today's reports came from Sears. In the fourth quarter the company saw its profit more than double from the year previous. Cost cutting and strong sales from its Kmart chains helped Sears post its best quarterly profit in three years.

Although today's reports have been impressive, not everyone's numbers have been as good. On Monday,

Nordstrom

(JWN) - Get Report

kicked off the week's retail fueled earnings calendar with less-than-stellar results. The retailer's revenue was considerably stronger than the previous year's results and in line with what analysts had predicted. However, expectations were high and the firm's fourth-quarter earnings per share missed estimates by two cents.

Looking to the remainder of this week, investors can expect to learn how

Limited

(LTD)

and

TXJ

(TJX) - Get Report

fares on Wednesday.

Gap

(GPS) - Get Report

,

Kohls

(KSS) - Get Report

and

Safeway

(SWY)

are slated to report their quarterly results Thursday.

XRT is designed to provide investors with broad exposure to top retail giants. In doing so, the fund takes a traditional consumer discretionary fund and blends in holdings often found within consumer staples ETFs. This allows investors to benefit from the upside potential of a company like

Tiffany & Co

(TIF) - Get Report

and

American Eagle Outfitters

(AEO) - Get Report

, while holding more stabile firms such as

CVS Caremark

(CVS) - Get Report

and

Wal-Mart

(WMT) - Get Report

.

According to the fund's sector breakdown, 80% of XRT is dedicated to the consumer discretionary sector, while the rest of the index is represented by staples.

Aside from its distinctive sector breakdown, XRT benefits from its wide array of holdings. This fund tracks more than 60 different companies, providing plenty of diversification. For instance, of all the retail firms reporting this week, SHLD is the only one that can be found among XRT's top 10 holdings. However, despite the firm's high ranking, it accounts for only 2% of XRT's total portfolio.

Nordstrom, listed as the forty-fifth largest holding in the fund, accounts for 1.5% of the instrument's portfolio.

In the past month through Feb. 22, XRT's unique investing strategy has paid off. Its 6% returns have trumped those of more traditional consumer staples and consumer discretionary ETFs like the

Consumer Staples Select Sector SPDR Fund

(XLP) - Get Report

and the

Consumer Discretionary Select Sector SPDR Fund

(XLY) - Get Report

, which have returned 3% and 4%, respectively.

Investors looking for a retail holding for this earnings season and beyond should keep their eye on XRT. Although its near equally weighted portfolio prevents it from seeing any large moves, its unique take on the consumer industry is ideal for investors looking for a long-term holding that will see stable growth.

-- Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion does not have holdings in any of the equities mentioned.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.