Top 10 Consumer Discretionary ETFs

NEW YORK ( ETF Digest) -- The consumer sector overall is said to comprise nearly two-thirds of U.S. GDP growth. For that reason alone focusing on the conditions of this sector is important for all investors. The list of ETFs available is growing and the indexes they're related to can be quite different one to the next. Some issues are new and have yet to gain wide support despite being well structured with a linked index and low fees.

One strange thing you might discover is some popular ETFs have holdings and weightings which are surprising and not intuitive despite good looking charts. For many investors, knowing what you own or wish to own is important. Retail and related consumer issues (excluding Consumer Staples) can offer dramatic examples of what's under the hood and perhaps offer some surprises.

Let's look at a variety of these ETFs with their top holdings and see if from a fundamental view they meet the test of what you think you'd find under the hood. Then we'll view current technical market conditions and trends as they apply to each.

ProShares and DirexionShares have leveraged long and inverse issues for those investors wishing to hedge or speculate.

We rank the top 10 ETF by our proprietary stars system as outlined below. However, given that we're sorting these by both short and intermediate issues we have split the rankings as we move from one classification to another.


Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity


Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Decent liquidity


Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity


Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average where and if enough data is available. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach.

Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

#10: PowerShares Small Cap Consumer Discretionary ETF (PSCD)

PSCD the S&P Small-Cap 600 Consumer Discretionary Index which is comprised of common stocks of U.S. consumer discretionary companies that are principally engaged in the businesses of providing consumer goods and services that are cyclical in nature, including retail, automotive, leisure and recreation, media and real estate.

The fund was launched April 2010. The expense ratio is .29%. AUM equal $46 million and average daily trading volume is less than 10K shares. As of late January 2012 the annual dividend yield was .52% and YTD return 7.20%. The one year return was 7.76%.

Data as of First Quarter 2012

PSCD Top Ten Holdings & Weightings
  1. Carter's, Inc. (CRI): 2.91%
  2. Wolverine World Wide (WWW): 2.63%
  3. Brunswick Corporation (BC): 2.40%
  4. SCP Pool, Inc. (POOL): 2.13%
  5. HSN, Inc. (HSNI): 2.07%
  6. Genesco, Inc. (GCO): 2.07%
  7. Hillenbrand, Inc. (HI): 2.06%
  8. Men's Wearhouse (MW): 2.06%
  9. Crocs, Inc. (CROX): 2.01%
  10. Joseph A. Bank Clothiers (JOSB): 1.99%

#9: Rydex S&P Equal-Weight Consumer Discretionary ETF (RCD)

RCD follows the same index as XLY but breaks the index into equal weightings. The fund was launched in November 2006. The expense ratio is .50%. AUM equal $27 million and average daily trading volume is 10K shares. As of late January 2012 the annual dividend yield was 1.12% and YTD return 6.42%.  The one year return was 11.01%.

As a side note we really like RCD but the sponsor has gone through successive ownership changes over the past few years and the marketing effort has been lacking. Equal weight ETFs offer investors a good alternative choice from the more conventionally weighted issues.

Data as of First Quarter 2012

RCD Top Ten Holdings & Weightings
  1. Cablevision Systems A (CVC): 1.48%
  2. DeVry, Inc. (DV): 1.39%
  3. CBS Corporation B (CBS): 1.32%
  4. PulteGroup Inc (PHM): 1.32%
  5. Wyndham Worldwide Corporation (WYN): 1.32%
  6. Apollo Group Inc A (APOL): 1.31%
  7. International Game Tech. (IGT): 1.31%
  8. Johnson Controls Inc (JCI): 1.31%
  9. Washington Post Company (WPO): 1.31%
  10. H&R Block Inc (HRB): 1.30%

 

#8: PowerShares Dynamic Retail ETF (PMR)

 

PMR follows the Dynamic Retail Intellidex Index which is an "enhanced" index applying quantitative strategies to achieve outperformance compared to a more static index. The index evaluates companies based on fundamental growth, stock valuation, investment timeliness and risk factors. The fund was launched in October 2010.

The expense ratio is .60%. AUM equal $36 million and average daily trading volume is 42K shares. As of late January 2012 the annual dividend yield was 1.01% and YTD return 5.60%. The one year return was 23.24%.

Remember an ETF based on an enhanced index may outperform on the upside when markets are rising and underperform when markets and/or the category are under stress.

Data as of First Quarter 2012

PMR Top Ten Holdings & Weightings
  1. Limited Brands, Inc. (LTD): 5.14%
  2. Macy's Inc (M): 5.11%
  3. Whole Foods Market, Inc. (WFM): 4.99%
  4. Costco Wholesale Corporation (COST): 4.92%
  5. TJX Companies (TJX): 4.89%
  6. The Kroger Co (KR): 4.87%
  7. Bed Bath & Beyond, Inc. (BBBY): 4.87%
  8. Ross Stores, Inc. (ROST): 4.86%
  9. Amerco, Inc. (UHAL): 2.88%
  10. Express, Inc. (EXPR): 2.86%

  

#7: Van Eck Retail ETF (RTH)

RTH is the newly converted ETF which was once Merrill Lynch HOLDRs and assumed by Van Eck. The weightings for HOLDRs given the structure as a trust and could not be changed. Van Eck has chosen to create a new index, Market Vectors US Listed Retail 25 Index. Van Eck hasn't changed the weightings that much as of the relaunch in December 2011. This decision was made so as not to disrupt current investors in the previous ETF at this time. The original HOLDRs was launched in May 2001.

The expense ratio is .35%. AUM equal $65 million and average daily trading volume is 120K shares. As of late January 2012 the annual dividend was unavailable given the restructuring and YTD return was 4.63%. The one year return is irrelevant at this point.

Data as of First Quarter 2012

Top 10 Holdings & Weightings

1.    WAL-MART, WMT 10.93%

2.    HOME DEPOT, HD 7.09%

3.    AMAZON, AMZN 6.90%

4.    CVS CAREMARK, CVS 5.76%

5.    LOWES CO, LOW 5.23%

6.    WALGREEN CO, WAG 4.89%

7.    TJX COMPANIES, TJX 4.72%

8.    SYSCO CORP, SYY 4.62%

9.    COSTCO, COST 4.60%

10.  TARGET CORP, TGT 4.59% 

#6: iShares S&P Global Consumer Discretionary ETF (RXI)

RXI follows the S&P Global Consumer Discretionary Index. The fund was launched in September 2006. The expense ratio is .48%. AUM equal $121M and average daily trading volume is 15K shares. As of late January 2012 the annual dividend yield was 1.78% and YTD return 6.97%. The one year return which reflects eurozone volatility was -.42%.

Data as of First Quarter 2012

RXI Top Ten Holdings & Weightings

  1. McDonald's Corporation (MCD): 4.67%
  2. Toyota Motor Corporation (7203): 4.14%
  3. The Walt Disney Co (DIS): 3.03%
  4. Comcast Corp A (CMCSA): 2.96%
  5. Home Depot, Inc. (HD): 2.95%
  6. Amazon.com Inc (AMZN): 2.94%
  7. Honda Motor Company (7267): 2.32%
  8. Ford Motor Co (F): 1.95%
  9. Daimler AG (DDAIF): 1.93%
  10. News Corp A (NWSA): 1.81%

 

#5: iShares Dow Jones U.S. Consumer ETF (IYC)

IYC follows the Dow Jones U.S. Consumer Services Index. The fund was launched in June 2000. The expense ratio is .48%. AUM equal $276 million and average daily trading volume is 61K shares.

As of late January 2012 the annual dividend yield was 1.105% and YTD return 4.68%%. The one year return was 9.98%.

Data as of First Quarter 2012

IYC Top Ten Holdings & Weightings
  1. Wal-Mart Stores Inc (WMT): 6.49%
  2. McDonald's Corporation (MCD): 6.35%
  3. Home Depot, Inc. (HD): 3.97%
  4. The Walt Disney Co (DIS): 3.96%
  5. Amazon.com Inc (AMZN): 3.74%
  6. CVS Caremark Corp (CVS): 3.36%
  7. Comcast Corp A (CMCSA): 3.04%
  8. Time Warner Inc (TWX): 2.22%
  9. Costco Wholesale Corporation (COST): 2.21%
  10. Starbucks Corporation (SBUX): 2.10%

#4: First Trust Consumer Discretionary AlphaDex (FXD)

 

FXD follows the StrataQuant Consumer Discretionary Index which is considered an "enhanced" index. Various quantitative measures and inputs are analyzed and then constructed from the Russell 1000 Index to create the index constituents. The fund was launched in May 2007. The expense ratio is .70%. AUM of $538 million and average daily trading volume is 337K shares.

As of late January 2012 the annual dividend yield was .64% and YTD return 6.60%. The one year return was 8.03%.  An enhanced index can outperform as markets rise but perhaps underperform when falling.

Note in the holdings the assets are fairly equally weighted.

Data as of First Quarter 2012

FXD Top Ten Holdings & Weightings
  1. Liberty Media Corporation A (LMCA): 1.68%
  2. Visteon Corp. (VC): 1.63%
  3. LKQ Corporation (LKQX): 1.58%
  4. Sally Beauty Holdings Inc (SBH): 1.52%
  5. Polaris Industries, Inc. (PII): 1.51%
  6. Deckers Outdoor Corporation (DECK): 1.46%
  7. Tractor Supply (TSCO): 1.45%
  8. Education Management Corporation (EDMC): 1.44%
  9. Gannett Co Inc (GCI): 1.43%
  10. Ulta Salon Cosmetics & Fragrances, Inc. (ULTA): 1.40%

 

#3: Vanguard Consumer Discretionary ETF (VCR)

 

VCR follows the MSCI US Investable Market Consumer Discretionary 24/50 Index which consists of small, medium and large companies in the consumer discretionary sector. The index also includes automotive, household durable goods, textiles and apparel, and leisure equipment. Hotels, restaurants and of the leisure facilities and services are also included. The fund was launched in January 2004.

The expense ratio is .19%. AUM equal $373M and average daily trading volume is 41K shares. As of late January 2012 the annual dividend yield was 1.38% and YTD return 6.39%. The one year return was 9.32%.

Data as of First Quarter 2012

VCR Top Ten Holdings & Weightings
  1. McDonald's Corporation (MCD): 6.27%
  2. Amazon.com Inc (AMZN): 5.38%
  3. The Walt Disney Co (DIS): 3.72%
  4. Home Depot, Inc. (HD): 3.61%
  5. Comcast Corp A (CMCSA): 2.97%
  6. Ford Motor Co (F): 2.36%
  7. DIRECTV (DTV): 2.23%
  8. Target Corp (TGT): 2.21%
  9. Time Warner Inc (TWX): 2.21%
  10. Nike, Inc. B (NKE): 2.15%

 

#2: SPDR Retail ETF (XRT)

XRT follows the S&P Retail Select Industry Index which is an equally weighted index. The fund was launched in June 2006. The expense ratio is .35%. AUM equal $655M and average daily trading volume is 8M shares. As of late January 2012 the annual dividend yield was .95% and YTD return 5.35%. The one year return was 19.39%.

In the holdings data below you'll see more of what you'd expect from a consumer oriented ETF.

Direxion has leveraged long or short ETFs available for hedging or speculating.

Data as of First Quarter 2012

XRT Top Ten Holdings & Weightings
  1. Winn-Dixie Stores, Inc. (WINN): 1.88%
  2. SUPERVALU Inc (SVU): 1.16%
  3. Ruddick Corporation (RDK): 1.14%
  4. CVS Caremark Corp (CVS): 1.14%
  5. Casey's General Stores, Inc. (CASY): 1.12%
  6. J.C. Penney Co Inc (JCP): 1.12%
  7. Urban Outfitters Inc. (URBN): 1.12%
  8. GNC Acquisition Holdings Inc (GNC): 1.12%
  9. PetSmart Inc. (PETM): 1.11%
  10. Pricesmart, Inc. (PSMT): 1.11%

 

#1: SPDR Consumer Discretionary ETF (XLY)

XLY follows the Consumer Discretionary Select Sector Index from that portion of the S&P 500 Index. The fund was launched in December 1998. The expense ratio is .19%. AUM equal $2.6B and average daily trading volume is 5M shares. As of late January 2012 the annual dividend current yield was 1.55% and YTD return was 5.72%. The one year return was 10.39%.

Of note is the index linked to XLY consists of large companies which have strong consumer characteristics but away from typical retail issues for example.

ProShares offers leveraged long and inverse issues for investors wishing to hedge or speculate.

Data as of First Quarter 2012

XLY Top Ten Holdings & Weightings

  1. McDonald's Corporation (MCD): 8.44%
  2. The Walt Disney Co (DIS): 5.54%
  3. Home Depot, Inc. (HD): 5.33%
  4. Comcast Corp A (CMCSA): 5.31%
  5. Amazon.com Inc (AMZN): 5.18%
  6. Ford Motor Co (F): 3.36%
  7. News Corp A (NWSA): 3.21%
  8. Time Warner Inc (TWX): 2.97%
  9. Nike, Inc. B (NKE): 2.94%
  10. Target Corp (TGT): 2.83%

 

The choices for investors interested in retail issues are similar but certainly can vary especially given different trading characteristics. For example, traders may wish to utilize more liquid issues when moving in and out suits them. If an ETF index structure pleases you but volume is light consider using limit orders for any trading.

Our bias generally is to the more liquid issues unless we utilize them in Lazy portfolio approaches. Just always remember issuers issue and many times their interests aren't aligned with yours. They primarily have a business interest and wish to have a competitive presence in any popular sector.

Internationally there is existing consumer or retail related issues available from Brazil and India which should attract investors given positive demographics particularly in the emerging market sector.

For further information about portfolio structures and more detailed technical information, including DeMark Indicators, using these or other ETFs see www.etfdigest.com . If you wish to take advantage of gaining access to our technical indicators, portfolios and member commentary you may take advantage of a free 14-day trial here .

You may address any feedback to: feedback@etfdigest.com

Join in the conversation by following us on Facebook & Twitter .

The ETF Digest is long XLY as of the above date.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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