NEW YORK (TheStreet) -One slice of the market which will receive particularly heavy coverage as we head towards the end of the year will be the retail industry.
Black Friday is still days away but offers from a number of major retailers, including
have already been leaked, fueling anticipation among consumers.
As retailers buckle down and prepare for the wild crowds of holiday shoppers which will fill their aisles throughout the eventful day, ETF investors have a great chance to follow the fanfare using the
SPDR S&P Retail ETF
Black Friday and the holiday season should provide retailers and XRT with a nice pop. However, retail's strength may persist well beyond the next few weeks and months as consumers continue along on the way towards recovery.
Although economic storms persist, we are increasingly seeing evidence that the consumer is cautiously reentering the marketplace.
This week, investors were treated to a collection of positive data points which point to strength for the retail industry and the consumer. At the start of the week, the U.S. Commerce Department reported that retail sales increased by 1.2% in October, handedly beating analyst expectations. This marks the fourth consecutive month of increases and strongest jump since March 2010.
Additionally, throughout the most recent earnings season investors have been exposed to optimistic reports from a slew of companies in various subsectors of the retail industry. Leading discounter, Wal-Mart announced earnings inline with analyst expectations this week while luxury retailer,
and teen retailer
both managed to exceed forecasts.
The positive factors relating to the consumer and retail may make this industry appear to be a sure thing investment. However, navigating this slice of the market can be tricky and stock picking may not be the most appropriate way for long-term investors to play it. The retail industry is multifaceted, composed of companies which appeal to wildly different consumer bases. Therefore, as we have seen in the past, it is not uncommon for certain subsectors to lag while others outperform.
An ETF like XRT helps remove the guesswork because it boasts nearly equal exposure to about 70 positions across the retail spectrum.
Among the fund's top holdings are
Abercrombie & Fitch
, and Best Buy.
XRT also sets aside a particularly large slice of its portfolio for automotive companies including
Group 1 Automotive
. Together, these six positions make up only 13% of the fund's portfolio.
Although economic storms will likely persist in the foreseeable future, I'm confident that we are on a path which will lead to strength in the future. I feel that this holiday season will help lend credibility to the belief that the consumer is on the rebound. Investors have a great chance to take advantage of their ongoing recovery with XRT.
Written by Don Dion in Williamstown, Mass.
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At the time of publication, Dion Money Management did not own any of the equities mentioned.
Don Dion is president and founder of
, 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.