3 ETFs banking on consumer revival

Funds tracking the Internet, retail and food figure to perform when the economy recovers and consumers open their wallets.

By TheStreet Staff Oct 27, 2010 11:29AM

Save on shopping © Photodisc / Getty ImagesBy Don Dion, TheStreet

 

Although the recovery has been slow, it has been a recovery nonetheless. For consumers, the improving environment means cautiously reopening wallets and starting to spend once more.

 

Using ETFs, you can play the consumer resurgence from a number of different perspectives. We have further to go on the path to recovery as we continue to make progress. Investors may want to pick up exposure to one or more of the following plays.

 

1. PowerShares Dynamic Food & Beverage Portfolio (PBJ)

 

As consumers warm up to the economic recovery, one market  that will see an uptick is restaurants. Investors have an opportunity to profit through the PowerShares Dynamic Food & Beverage Portfolio as consumers and their families dine.

PBJ provides a perfect opportunity to bank on the success of popular fast-food giants such as McDonalds (MCD), Chipotle Grill (CMG), and Yum! Brands (YUM).

 

The recovery in the food industry will not start with high-end steakhouses or the Four Seasons. Rather, as consumers cautiously take their loved ones out for a meal, less expensive, family-oriented establishments will more likely be the destination.

 

2. SPDR S&P Retail ETF (XRT)

 

Black Friday may still be weeks away, but investors can take advantage of the holiday shopping season today by gaining exposure to the retail industry.

 

As with the food and beverage industry, I see retail as a region that will benefit as consumers make cautious steps back into the global marketplace.

 

While I have confidence that the consumer recovery will benefit retail, the past has shown that because of the industry's various facets that appeal to different types of consumers, retail can be a difficult industry to navigate from a stock picker's perspective.

 

Using an ETF such as SPDR S&P Retail ETF, investors can venture into this industry in a safe manner.

 

XRT's holdings include more than just teen apparel companies such as Abercrombie & Fitch (ANF) and American Eagle (AEO) and department stores.

 

XRT also boasts heavy exposure to automotive firms such as CarMax (KMX); discount chains such as Wal-Mart (WMT) ; and luxury retailers such as Tiffany (TIF).

 

This diverse exposure allows investors to access companies across the entire retail spectrum at once.

 

3. First Trust Dow Jones Internet Index Fund (FDN)

 

Technology has been a hot sector to watch throughout the economic recovery as consumers find ways to connect to the people and world around them. The aspect of this industry that will benefit the most from the consumer resurgence will be the firms connected to the Internet.

 

In the past, Research In Motion's (RIMM) BlackBerrys and other handheld gadgets appealed mainly to the business world. However, with the popularity and accessibility of smartphones such as the Apple's (AAPL) iPhone, and the growing interest in social media websites like Facebook, technology is becoming more commonplace within our everyday lives.

FDN tracks a basket of companies hailing from across the Internet industry that will benefit from our growing dependence on these products. Google (GOOG), Netflix (NFLX), and Yahoo! (YHOO) are some of the fund's largest positions.

 

Also, playing off retail's strength, FDN will benefit from its large Amazon (AMZN) and Ebay(EBAY) positions as consumers increasingly turn to the Web to get their shopping done.

 

As we continue along the road to recovery I foresee the consumer being an extremely exciting component of the economy to watch. Using funds such as PBJ, XRT, and FDN investors can get a front row seat to the consumer recovery.

 

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