Amazon Prime Day has arrived.
Amazon’s bargain-focused two-day purchasing vacation on Tuesday and Wednesday highlighted shoppers’ shift to purchasing online in a tough yr for brick-and-mortar retailers. The inventory is up nearly 89% yr to this point, driving online retail-based exchange-traded funds that maintain the identify.
The three ETFs with the most Amazon publicity on the market — Fidelity’s MSCI Consumer Discretionary Index ETF (FDIS), ProShares’ Long Online/Short Stores ETF (CLIX), and ProShares’ Online Retail ETF (ONLN) — are up 38%, 85% and 93% this yr, respectively. ONLN hit a 52-week excessive Tuesday.
Four key elements have been driving buyers to e-commerce, Simeon Hyman, world funding strategist at ProShares, instructed CNBC’s “ETF Edge” on Monday.
First, “the transition is earlier than you think. You have not missed it,” he stated. “Only 16% of retail sales were online in Q2. So, 84 cents were spent in brick-and-mortar stores and a lot of them were closed.”
The coronavirus pandemic’s enhance to enterprise additionally can’t be discounted, Hyman stated, including that it helped push retail gross sales to 16% from 11%.
“Think about a quadrupling of penetration in the laggard, groceries, and also the stickiness of changes in share from folks like Chewy — which are 70% subscriptions, so, those new customers are sticky — or Etsy, which has so many more eyeballs after 15% of their sales came from masks,” he stated.
Third are the fundamentals, the strategist stated. Walmart has clawed its option to No. 2 for online retail, however its margins have been shrinking over the final 10 years whereas Amazon’s have doubled, he stated.
“The fundamentals point towards the online folks,” he stated.
“Finally, if you see acceleration in performance like that, you worry about valuation. Let me give you the following surprising note: If you look at the relative valuation of our online basket, the ProShares online retail basket, and you compare that to the tech sector, we’re trading at half the price-to-book [value] of three or four years ago. So, at least on a relative basis — I know it’s hard to do absolute valuation these days — not as expensive as you might think.”
Ed Rosenberg, senior vice chairman and head of ETFs at American Century, stated Amazon’s affect is obvious even in his agency’s Focused Dynamic Growth ETF (FDG), launched earlier this yr.
“Even the active managers recognize that in the retail space, Amazon is the play right now,” he stated in the identical “ETF Edge” interview.
Amazon’s “downstream impact” additionally issues, Rosenberg stated.
“If you’re buying online, where else does that impact [go]?” he stated. “Just using that fund as the example, one of the top 10 holdings is also Mastercard and I think you’re seeing some of the downstream impact of people using credit cards and seeing growth in that area as well, whether it’s Mastercard, Visa, American Express, to take advantage of what’s happening with Amazon and Prime Day as well as being online.”