Amid soaring inflation and rising market uncertainty, Americans are taking a breather to enjoy the long July 4 weekend.
Around 84% of Americans plan to celebrate Independence Day by spending on average $84.12 per person on food, according to the National Retail Federation (NRF). About a quarter of those will purchase additional patriotic items like flags and fireworks. And families across the US are estimated to spend a whopping $2.3 billion on fireworks for this year’s celebrations.
In addition, the American Automobile Association (AAA) estimates nearly 48 million people will travel during the holiday weekend. Therefore, shares of transportation, restaurants, lodging, and retail companies come into focus in July.
That said, here are two exchange-traded funds (ETFs) that could appeal to readers looking to benefit from Fourth of July consumer trends.
1. Consumer Discretionary Select Sector SPDR Fund
- Current Price: $140.01
- 52-week range: $133.04 – $215.06
- Dividend yield: 0.83% per year
- Expense ratio: 0.10% per year
First up on our list is the Consumer Discretionary Select Sector SPDR® Fund (NYSE:), which invests in US large-cap consumer-discretionary stocks from the Index. The fund was first listed in December 1998.
XLY, which tracks the market-cap weighted Index, has 58 stocks.
In terms of sectoral allocations, we see internet & direct marketing retail (23.8%), specialty retail (21.3%), automobiles (20.9%), hotels, restaurants & leisure (17.6%), and textiles apparel & luxury goods (5.2%).
The top 10 holdings account for close to a quarter of $14 billion in net assets. In other words, the portfolio is highly concentrated.
Leading names include Amazon (NASDAQ:), Tesla (NASDAQ:), Home Depot (NYSE:), McDonald’s (NYSE:), Nike (NYSE:), Lowe’s (NYSE:), and Starbucks (NASDAQ:).
XLY saw a record high in November 2021. However, it has lost 31.5% since January and 22% over the past 12 months. It also hit a multi-year low on June 16.
Trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 22.01x and 5.32x. Readers who expect that the decline in these large-cap names will soon come to an end could consider buying XLY around these levels.
2. Invesco Dynamic Food & Beverage ETF
- Current Price: $44.39
- 52-week range: $40.29 – $49.46
- Dividend yield: 0.87% per year
- Expense ratio: 0.63% per year
For many Americans, July 4 celebrations are not complete without a good barbecue, lots of hotdogs, and beverages. In 2021, the nation spent more than $7.5 billion on hotdogs and sausages in supermarkets, according to the National Hot Dog & Sausage Council (NHDSC). Meanwhile, WalletHub anticipates over $1.4 billion to be spent on beer and wine on the country’s birthday.
Next is the Invesco Dynamic Food & Beverage ETF (NYSE:), which provides concentrated exposure to 30 US stocks in the food & beverage industry. Companies are selected based on five metrics: price momentum, earnings momentum, quality, management action, and value.
The ETF, which tracks the Dynamic Food & Beverage Intellidex Index, was first listed in June 2005. It currently has a basket of 32 holdings. Assets are allocated to companies of all capitalizations, including large-cap stocks (39.7%), mid-caps (24.6%), and small-caps (35.7%).
The top 10 names comprise nearly half of $287.3 million in net assets. Sysco (NYSE:), General Mills (NYSE:), Hershey (NYSE:); Keurig Dr Pepper (NASDAQ:), PepsiCo (NASDAQ:), and Archer-Daniels-Midland (NYSE:) lead the names on the roster.
PBJ is down 1.5% year-to-date (YTD) but has returned 5.8% over the past 12 months. Forward price-to-earnings (P/E) and price-to-book (P/B) ratios stand are 17.07x and 2.80x.
We like many of the defensive names in PBJ and believe it deserves further due diligence. However, potential investors should note the high expense ratio.