With online shopping taking a large piece of the broader retail industry, the Amplify Online Retail ETF (IBUY ) and rival e-commerce-focused exchange traded funds (ETFs) are benefiting.
IBUY, the first US-listed ETF dedicated to online retail, is up 28.5% year-to-date, more than double the 12.3% returned by the SPDR S&P Retail ETF (XRT ). IBUY seeks investment results that generally correspond to the price and yield of the EQM Online Retail Index. The fund will invest at least 80 percent of its total assets in global equity securities that comprise the index, which will primarily include common stocks and/or depositary receipts, such as ADRs and GDRs.
The index seeks to measure the performance of global equity securities of publicly traded companies with significant revenue from the online retail business. The index methodology is designed to result in a portfolio that has the potential for capital appreciation.
“The disparity might be related to their respective makeups: While the S&P fund, known more commonly by its ticker, XRT, counts brick-and-mortar names like Five Below among its top holdings, Amplify’s ETF, ticker IBUY, invests solely in stocks that meet its requirements — at least 70% or $100 billion of the underlying company’s revenue must come from online sales,” reports CNBC.
When it comes to online retail, investors often think of Amazon.com Inc. (AMZN) and while that company is the largest U.S. e-commerce firm, IBUY is soaring without a major position in that stock. IBUY holds 40 stocks, the largest weight being just over 5% and Amazon is not one of IBUY’s top 10 holdings.
Since IBUY debuted just over three years ago, it has made a habit of beating traditional retail ETFs, such as XRT.
“Add that to the longer-term divergence between IBUY, which is up more than 100% in the last three years, and the XRT, which has gained less than 4% over the period,” according to CNBC.
Other data points confirm the growing leadership of online retail in the broader retail space. The e-commerce segment is a quickly growing consumer sector. In 2017, 2.73 billion online shoppers accounted for sales of over $2.3 trillion. Looking ahead, the user base is expected to grow to 3.1 billion people globally by 2021. Meanwhile, online retail revenues are expected to surge to $4.88 trillion by 2021.
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