Shopping For A Deal

Published on Thursday, 02 February 2012 20:19 Written by Todd Shriber

New York, February 2^nd  (TradersHuddle.com) – There are sectors that offer a glimpse as to just how healthy the consumer. And then are those industry groups that open the door all the way and really unveil just how cheery or reluctant consumers are feeling. In the U.S., the importance of the consumer cannot be understated because it is the consumer that accounts for nearly two-thirds of this country’s gross domestic product. For that reason, retail ETFs are certainly worth getting acquainted with. In particular, the SPDR S&P Retail ETF (NYSE: XRT).

Well despite consumer confidence and sentiment data that has ranged from encouraging to discouraging and back again in recent months, the SPDR S&P Retail ETF has been on a tear. XRT is up about 25% since its October lows and has tacked on over 6% since the start of the new year. The chart indicates XRT broke heavy horizontal resistance last month and now the fund can be found consolidating in a higher range right near its 52-week high.

Regarding the fundamental thesis behind more potential gains for XRT, well, that is almost solely up to consumer- and employment-related data. XRT allocates almost 9.2% of its weight to food retailers, many of which are supermarkets like Supervalu (NYSE: SVU) or major food sellers like Target (NYSE: TGT) and that gives the ETF somewhat of a staples feel.

However, the rest of the ETF’s weight is distinctly discretionary and that’s what gives XRT an intimate relationship with critical economic data points. Apparel retailers and specialty stores represent over 46% of XRT’s weight and those are discretionary groups to be sure. Even if one argues auto retailers and drug stores, which combine for 16.2% of XRT’s, are staples groups there’s still no getting around the notion that XRT is more consumer discretionary than consumer staples.

And while XRT does offer exposure to some value stocks, Target being one and CVS Caremark (NYSE: CVS) being another, the fund is clearly home to more growth plays. That’s usually the case when one finds Amazon (NASDAQ: AMZN), Netflix (NASDAQ: NFLX) and Priceline (NASDAQ: PCLN) among an ETF’s holdings. On the other hand, that’s not such a bad thing because the first quarter, March in particular, is a great time to own growth stocks, retail and discretionary names in particular.

The vitals: XRT debuted in 2006. Today, the ETF has an expense ratio of 0.35% and almost $673.4 million in assets under management. XRT has average daily volume of 7.2 million shares and the fund is optionable and shortable. The ETF is currently about 6% above its 50-day moving average and almost 9% above its 200-day line.