Data Say This New Retail ETF Could Be A Winner

When an exchange traded fund is just over a month old, it's too soon to pass judgment on that product. Thanks to compelling fundamental factors in their respective market niches, however, some new ETFs immediately have the look of winners.

That could be the case for the ProShares Online Retail ETF ONLN, which is just over a month old.

What Happened

ONLN follows the ProShares Online Retail Index. That cap-weighted benchmark “is designed to measure the performance of publicly traded companies that principally sell online or through other non-store channels, such as mobile or app purchases, rather than through bricks-and-mortar store locations,” according to ProShares.

Again, an ETF that's barely more than a month old shouldn't be judged too favorably or harshly, but ONLN debuted on July 13 and by the end of last month had $4 million in assets under management. That number has since swelled to almost $6 million.

Why It's Important

A slew of data points indicate online retail ETFs, such as ONLN, could be well-timed concepts.

“Analysts expect the growth of online retail to continue. Today, about 10% of global retail sales are made online, which leaves a strategy such as ONLN’s with tremendous room for growth. Recent data indicates that online sales growth could double by 2030,” according to ProShares.

Last month, the Commerce Department said online retail sales increased 3.9 percent in the second quarter from the first quarter.

Citing Commerce Department data, ProShares points out that “the second quarter 2018 e-commerce estimate increased 15.2 percent (±4.2%) from the second quarter of 2017, while total retail sales increased 5.7 percent (±1.4%) in the same period.”

Traders doing some planning should keep in mind that third-quarter e-commerce sales data will be reported on Nov. 19, meaning ONLN could be trade-worthy around that report.

What's Next

Long-term fundamental data auger well for ONLN, particularly if e-commerce sales in the U.S. and China meet and exceed estimates. Those two countries combine for about 97 percent of ONLN's geographic weight.

As such, those countries' e-commerce titans dominate ONLN. Amazon.com Inc. AMZN and Alibaba Group Holding Ltd. BABA are by far ONLN's two largest holdings, combining for approximately 40 percent of the new ETF's weight.

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