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4 ETFs to Add to Your Fourth of July Celebration

With solid employment, rising income, low gas price, and higher consumer confidence, more Americans will binge on travel and barbecue this Fourth of July.

AAA estimates that a record 44.2 million Americans will travel 50 miles or more during the holiday weekend (June 30 to July 4), up 3% from last year. About 38 million will travel by car, over 3.5 million will fly, and the remaining will take other modes of transportation like bus, train or ship.

The spike in travel demand was driven by cheap gas prices. According to a GasBuddy, drivers on the road are likely to pay the lowest price in 12 years. Consumers will pay an average of $2.21 per gallon over the Independence Day weekend at the pump, well under the 10-year average of $3.14 and 12 cents lower than the price on New Year’s Day for the first time.

Apart from one of the busiest holidays, Independence Day also marks the beginning of the busiest half of the year for retailers. Many retailers are already flashing exciting deals for July Fourth and massive discounts are in the cards for the day. According to the National Retail Federation (NRF), Americans are expected to spend $7.1 billion to celebrate Independence Day, up 4.4% from last year. Spending per household is estimated at $73.42 on food for cookouts and barbecues, up from $71.34 last year (read: 5 ETFs & Stocks: Silver Lining in Soft May Retail Sales).

That said, this Fourth July will be a celebration of not only freedom, but also economic growth. Along with the spirits of Americans, this Independence Day should lift revenues and profits in various corners. Industries like transportation, lodging, hotel, restaurants, food and retail will benefit the most. Investors seeking to tap the fanfare could ride on these industries through the following ETFs:   

iShares Dow Jones Transportation Average Fund IYT

The ETF provides exposure to the broad transportation sector by tracking the Dow Jones Transportation Average Index. It holds a small basket of 20 stocks with heavy concentration on the top firm. Air freight and logistics takes the top spot with 29.3% share in the basket while railroads (24.1%) and airlines (23.7%) round off the top three. The fund has accumulated nearly $916.5 million in AUM while sees good trading volume of around 344,000 shares a day. It charges 44 bps in fees per year from investors. While the fund currently has a Zacks ETF Rank of 4 or ‘Sell’ rating,  it is expected to get a near-term boost from July Fourth holiday (read: ETFs & Stocks to Gain Height on Busy Air Summer Travel).

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top firm at 18.2% while other firms hold less than 8% share. The ETF has a certain tilt toward specialty retail and Internet & direct marketing that collectively make up for half of the portfolio. The product has amassed $66.5 million in its asset base and charges 35 bps in annual fees. Volume is light, exchanging 20,000 shares a day on average. RTH has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a Medium risk outlook.

PowerShares Dynamic Leisure and Entertainment Fund PEJ

This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 30 stocks. It is pretty well spread out across various securities as none accounts for more than 5.4% of total assets. From an industry look, restaurants and airlines take the largest share at 26% and 20%, respectively, followed by hotels & leisure facilities (18%) and casinos & gaming (14%). The ETF has amassed $127.6 million in its asset base and trades in light volume of 34,000 shares a day on average. Expense ratio comes in at 0.61%. PEJ has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook.

S&P SmallCap Consumer Discretionary Portfolio PSCD

The fund targets the broad consumer discretionary space by tracking the S&P SmallCap 600 Capped Consumer Discretionary Index. It holds 113 securities in its basket that are well spread out across components as each security holds less than 2.6% of the assets. Within the sector, specialty retail takes the top spot at 24.5% of the total, followed by double-digit allocations to hotel and restaurants, household durables and auto components. The product has attracted $62.8 million in AUM while sees light volume of just 5,000 shares per day. The ETF charges 29 bps in annual fees and has a Zacks ETF Rank of 3 with a High risk outlook (see: all the Consumer Discretionary ETFs here).

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ISHARS-TRAN AVG (IYT): ETF Research Reports
 
VANECK-RETAIL (RTH): ETF Research Reports
 
PWRSH-DYN LE&EN (PEJ): ETF Research Reports
 
PWRSH-SP SC C D (PSCD): ETF Research Reports
 
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