Retail leaders Best Buy, Target and Wayfair are among hot stocks to watch as the U.S. economy continues to recover from the coronavirus pandemic.
These retailers are just a handful of hot stocks that are building new bases, getting close to buy points or at new highs. But keeping track of the many players in the vast retail industry can be a tough task.
SPDR S&P 500 Retail is worth a look for investors trying to add retail stocks to their portfolio. The $660.6 million fund tracks the S&P Retail Select Industry Index, which provides access to the retail segment of the S&P Total Market Index. That helps investors gain exposure to large-, mid- and small-cap retailers.
The ETF, which marks its 15th anniversary in June, is up 35% this year through Thursday's close. That's far ahead of the S&P 500's 4% year-to-date gain. XRT's average annual returns over the past three, five and 10 years are 27%, 14.9% and 14.5%. The SPDR S&P 500 ETF Trust, by comparison, has returned 16.7%, 16% and 13.7% over the same periods.
Internet and direct marketing accounted for the biggest sector weight, at nearly 21% of assets. Automotive weighed in at about 18%, apparel also at 18% and specialty retail at 16%. Food retailers represented less than 7% and other industries 6%.
Murphy USA, AutoZone, Target, eBay, Best Buy and Wayfair were among the top 10 holdings as of March 24.
Wayfair Leads Fund's Hot Stocks
Wayfair, up 46% YTD, is one of the biggest winners. The Boston-based company sells home furnishings via five internet sites, including Wayfair, All Modern and Birch Lane. It also has operations in Canada, Germany and the U.K.
Like most retailers, Wayfair stock got slammed during the coronavirus market crash. But it staged a strong rebound, running up more than 1,500% to a late-August high before pausing to consolidate.
Wayfair turned its first annual profit, of $5.04 a share, last year. Year-over-year revenue grew 55% to $14 billion, extending the company's double-digit growth streak to nine years. Wayfair stock is near a 343.09 buy point from a cup with handle.
Best Buy and Target are close to buy points. Best Buy is about 6% away from a 123.40 entry of a double-bottom base. A 96 Composite Rating puts it at the top of the five-stock consumer electronics retail group.
Target is about 2% shy of a 196.35 buy point, also of a double-bottom base. The retail giant's 83 Composite Rating leads the five-stock major discount chains group. Whenever the top holdings in an ETF are near buy points, it's a good sign for the ETF.
AutoZone Drives To New High
AutoZone is at a new high and slightly extended from a 1297.92 buy point of a flat base. Though a 61 composite score is weak, the auto parts chain is clearly one of the hot stocks in the retail space. It has rallied 16% this year.
XRT has staged a strong rebound after tumbling more than 40% during last year's bear market. Shares rallied 277% from a March low to their late-January high. They're now working on a cup with handle base as they find support at the 10-week moving average. The potential buy point is 96.37, according to MarketSmith chart analysis.
XRT charges a 0.35% expense ratio.
Follow Nancy Gondo on Twitter at @IBD_NGondo
