3 retail ETFs trouncing the market

The Dow is up about 3.5% year-to-date. These ETFs are up 15% or more!

By InvestorPlace May 13, 2010 12:00PM

shopping retail salesCall it Christmas come early: Last week we learned that stocks posted an average gain of about 9% for March retail sales.

We also learned consumer spending in the U.S. rose in March by the most in five months, and many economists are predicting continued spending acceleration as the economy adds more jobs and gets back into the groove.


It’s hard to believe, but consumer spending may already top the 2008 peak before the market slump. Really! That means investors should seriously consider some type of retail play to benefit from these trends.


So why not add some easy diversification to your retail investments by going the exchange traded fund route? To help you along, here are three of the best performing consumer ETFs out there as of Tuesday’s market close:


The Rydex Equal Weight Consumer Discretionary ETF (RCD) doesn’t really like to play favorites, rebalancing regularly to make sure that there aren’t any component stocks that make up the lion’s share of the portfolio.

Perhaps its this diversification that has allowed the Rydex fund to ride the consumer trend to impressive gains so far in 2010. Top holdings right now are photo giant Eastman Kodak (EK), department store Sears (SHLD) and USA Today publisher Gannett (GCI), but only by small margins. I expect this ETF will trim back on these positions when it rebalances its holdings.


Overall RCD has generated about 17% year-to-date. The Dow Jones is up about 4.5% in the same period.


The PowerShares Consumer Discretionary ETF (PEZ) is a good mix of consumer holdings across a variety of sectors and a variety of company sizes.

Some top components are direct, such as retailer Nordstrom (JWN), while others are more proxy-type stocks that represent spending in general -- like Sherwin-Williams (SHW). When you think of consumer confidence you don’t necessarily harp on paint demand, but seeing as paint sales correlate directly to home sales or home improvement budgets, this is a good barometer stock for spending in general.

Overall, PEZ has generated almost 20% year-to-date. Again, the Dow is up about 4.5%


The Vanguard Consumer Discretionary ETF (VCR) is more of a big-name consumer play that is full of component stocks you’re sure to recognize like Amazon (AMZN) and McDonald’s (MCD). This is the blue-chip way to play spending via exchange traded funds. But don’t think just because these top constituent companies are large-caps that the VCR fund is sluggish. It has delivered impressive gains so far in 2010 and continues to look up.


Specifically, VCR is up 17.5% since January 1, 2010 as of today's market open.

Get a comprehensive list of 11 retail and consumer ETFs to buy flying high right now at InvestorPlace.com.



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