Make Money in Powerful Retail Stocks the Easy Way

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect retailers to do better in the near future, as the global economic recovery gains steam, the SPDR S&P Retail ETF  (NYSE: XRT  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in a lot of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The SPDR ETF's expense ratio -- its annual fee -- is a relatively low 0.35%.

This ETF has performed well, outperforming the world stock market handily over the past three and five years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

What's in it?
Plenty of retail companies had strong performances over the past year. Vitamin and wellness specialist GNC Holdings (NYSE: GNC  ) , for example, more than doubled, having benefited from higher profit margins on its self-branded health supplements. The company has been growing briskly, trouncing Wall Street expectations, and upping its own projections. In very different fashion than Facebook, it has been a rather successful recent IPO. Bears worry about its brick-and-mortar stores' ability to compete with online rivals.

Dollar Tree (Nasdaq: DLTR  ) gained about 62%, buoyed in recent years by tough economic times leading many consumers to focus even more on discount shopping. As the economy improves, though, some of these folks will start doing more shopping at more upscale venues. Bears see an upswing in luxury-brand sales as a troubling trend, and some find the stock overvalued.

Tractor Supply (Nasdaq: TSCO  ) , up 61%, has been a longtime winner, with its stock gaining more than 30% annually, on average, over the past decade. Shares fell back a bit recently, though, on worries that sales may be slowing. It's also viewed as overvalued by some, but its 0.8% dividend can offset that worry a tiny bit. And the dividend seems to be growing briskly; it was hiked by a full 67% recently, and with a low payout ratio has plenty of room to grow. The company plans to grow its store base by about 8% annually over the coming decade and is adding more consumable items to its product line to boost repeat visits.

Then there's Amazon.com (Nasdaq: AMZN  ) , up about 10%. One recent threat to the company is a movement to collect sales tax from online retailers -- though some think that it will hurt smaller vendors more, and could thus benefit Amazon. A trend helping Amazon is its growing Amazon Prime service, with membership expanding by about 20% annually, and those customers, freed from shipping charges and getting speedy deliveries, spending 130% more than non-members.

The big picture
Demand for retailers isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

Retailing is a compelling industry for us small investors to consider, partly because it's relatively easy to understand. And clearly, from the results above, there's good money to be made in it, as well. To get our analysts' take on two very promising retailing stocks, check out our special free report, "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail."

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Wal-Mart and Amazon.com, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Facebook and Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com, creating a diagonal call position in Wal-Mart, and shorting SPDR S&P Retail. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1899447, ~/Articles/ArticleHandler.aspx, 10/23/2014 4:46:54 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 16,677.90 216.58 1.32%
S&P 500 1,950.82 23.71 1.23%
NASD 4,452.79 69.95 1.60%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/23/2014 3:59 PM
AMZN $313.18 Up +0.21 +0.07%
Amazon.com CAPS Rating: ***
DLTR $58.51 Up +0.96 +1.66%
Dollar Tree Stores CAPS Rating: ****
GNC $39.89 Down -0.44 -1.09%
GNC HOLDINGS INC C… CAPS Rating: *****
TSCO $71.00 Up +9.70 +15.82%
Tractor Supply Com… CAPS Rating: ****

Advertisement