4 Top ETFs for Holiday Profits

How much shopping did you do over the Thanksgiving weekend?

According to experts who know a lot more about shopping than me, Americans spent a lot of money these past few days.

  • An Accenture (ACN) survey showed that more than half of Americans were expected to do some shopping this weekend.
  • Wells Fargo (WFC) forecast Americans will spend 3.7% more this holiday season than last year, buying gifts worth an average $706.

Retailers are opening their doors earlier and longer than ever. A few years ago, some aggressive retailers opened at midnight on Thanksgiving Day. Now some chain stores like Kmart (SHLD) are opening at 6 a.m. Thanksgiving morning.

As a result, Thanksgiving Day spending has been on a rapid growth spree, rising 18% in 2011 and 32% in 2012.

Confessions of a Cheapskate

As for me, shopping is one of my least-favorite things, and doubly so when stores are packed like they are on Black Friday.

However, I love to save money (though my children think I'm a cheapskate). While you won't catch me fighting the Black Friday crowds in a bricks-and-mortar store, I do my fair share of Christmas shopping on the Internet.

I've already bought ...

  • An Apple MacBook Air from Best Buy (BBY),
  • A Microsoft (MSFT) Xbox One gaming console from GameStop (GME),
  • An AirPort Time Capsule from Apple (AAPL),
  • An iPad Mini from Wal-Mart (WMT),
  • A pair of kendo fighting sticks from Amazon.com (AMZN), and
  • Gift cards from Buffalo Wild Wings (BWLD) and Subway.

As you know, online shopping is growing like mad. Analysts think holiday sales will hit $82 billion this holiday season, up 15% since last year, which is almost four times faster than overall retail sales growth.

As an investor, how can you cash in on the holiday shopping craze? Predicting the winning companies is pretty darn hard because of fickle consumer whims.

Of course, any e-commerce discussion has to include Amazon.com, the largest Internet retailer in the world; Apple with its wildly popular lineup of gizmos; and Wal-Mart, which gets roughly 10% of total sales from its website.

However, if you're more of an ETF investor, here are three to consider.

  • SPDR S&P Retail ETF (XRT) is the largest retail ETF with close to $1 billion in assets. The fund currently holds 99 different stocks. The top five are holdings are Rite Aid (RAD), the recently-merged Office Max/Office Depot (ODP), PriceSmart (PSMT), and Advance Auto Parts (AAP).
  • PowerShares Dynamic Retail Portfolio ETF (PMR) only invest in 30 stocks and its top five holdings are Walgreen (WAG), Best Buy, Kroger (KR), Lowe's (LOW), and CVS Caremark (CVS).
  • Market Vectors Retail ETF (RTH) is a basket of 26 stocks and has the best exposure to holiday shopper. The top holdings are Amazon.com, Wal-Mart, Home Depot (HD), Walgreen, and CVS Caremark.

I think one other ETF that could be an even bigger winner: PowerShares Golden Dragon China Portfolio (PGJ), which is up 49% so far this year.

China is not a historically Christian country, but its people have enthusiastically embraced the commercial part of Christmas. PGJ holds many Chinese e-commerce companies. Seven of the top 10 holdings are Internet-focused:

  • Ctrip.com (CTRP), the largest travel agency in China,
  • Baidu (BIDU), the Chinese equivalent of Google and Priceline put together,
  • Sina.com (SINA), China's version of Twitter (TWTR),
  • NetEase (NTES), a super popular online gaming service,
  • Youku Tuduo (YOKU), the Netflix of China, and
  • Sohu.com (SOHU), which resembles Yahoo! (YHOO).

If you want Chinese e-commerce exposure, PGJ can give it to you in a big and likely profitable way.

I'm not suggesting that you rush out and buy any of these securities tomorrow morning. My broader point: Any company that can get me to brush the cobwebs off my wallet is doing something right!

Happy shopping,


P.S. My colleague Geoff Garbacz just put together a terrific short video on how to trade options on ETFs. You can click on this link here to watch this power-packed five-minute presentation.

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Posted 12-05-2013 11:46 AM by Tony Sagami
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