Stock Markets

02/06/22, 07:32

Smiling Young Businessman

Tezcan Gecgil

Investing.com

Tezcan Gecgil, Ph.D. has worked in investment management in New York City, Princeton (NJ), Greenwich (CT), and London (U.K.).

She holds a Ph.D. (Business Studies) as well as MSc (Investment Banking & Trading) MBA and BA (Economics) degrees from leading U.S. and U.K. universities and has also completed all 3 levels of the Chartered Market Technician (CMT) examination.

Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

As she is also qualified as Clinical Hypnotherapist at the graduate level, she coaches traders and HNW investors on trading psychology.

She divides her time between Naples (FL) and London.

2 ETFs To Ride Amazon's Upside Ahead Of 20-1 Stock Split

On Monday, June 6, Amazon.com (NASDAQ:AMZN) shares will start trading on a 20-to-1 split-adjusted basis. The stock has soared more than 12% since shareholders voted in favor of the split on May 25.



Wall Street pays close attention to stock-split announcements, which may work as upside catalysts for share prices. For instance, research suggests between 2010 and 2020, the 240 stock splits registered an average six-month return of 5.25% versus the S&P 500's 4.39%.


In July 2021, Amazon stock hit $3,773.08—a record high. But, on May 24, it hit a 52-week low of $2,025.24, losing more than 45% of its value in less than a year. So far, in 2022, AMZN stock is down over 27%. By comparison, the NASDAQ 100 Index has dropped 23.1% since January.


Still, among 56 analysts polled by Investing.com, AMZN stock has an “outperform” rating.


Source: Investing.com


Furthermore, according to several valuation models, including P/E or P/S multiples or terminal values, the average fair value for Amazon stock on InvestingPro stands at $3,109.33, an increase of 27.8% from the current level. Understandably, on June 6, this price will also reflect the split.


Source: InvestingPro


With that information, here are two exchange-traded funds (ETFs) that hold AMZN stock in their portfolios. They could appeal to Amazon bulls who also want to diversify their holdings.


1. Vanguard Consumer Discretionary Index Fund ETF Shares

  • Current Price: $254.09

  • 52-week range: $226.28 - $360.54

  • Dividend yield: 1.20%

  • Expense ratio: 0.10% per year


The first fund on today’s list is the Vanguard Consumer Discretionary Index Fund ETF Shares (NYSE:VCR). It invests in businesses that offer goods or services that consumers do not necessarily need but buy on a discretionary basis. The fund was first listed in January 2004.



VCR, which tracks the MSCI U.S. Investable Market Consumer Discretionary Index, currently holds 303 stocks. In terms of sectoral allocations, we see Internet & Direct Marketing Retail (21.6%); Automobile Manufacturers (17.8%); Home Improvement Retail (9.5%); Hotels, Resorts & Cruise Lines (7.1%); General Merchandise Stores (4.4%); Apparel Retail (3.5%) and others.

The top 10 stocks comprise over 58% of $6.0 billion in net assets. Among them, Amazon has the highest slice with 19.2%. Next come Tesla (NASDAQ:TSLA); Home Depot (NYSE:HD); McDonald’s (NYSE:MCD), Nike (NYSE:NKE), and Lowe’s Companies (NYSE:LOW).

VCR hit a record high in November 2021. But the fund is down 25.4% year-to-date. Trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 21.7x and 5.1x. A further decline toward $250 or even below would offer a better entry point into VCR.


2. ProShares Online Retail ETF

  • Current Price: $34.17

  • 52-week range: $29.84 - $86.23

  • Expense ratio: 0.58% per year


In 2021, almost 9.5% of all retail spending stateside happened on Amazon. Next came Walmart (NYSE:WMT), with an 8.6% share. And when we look at the U.S. eCommerce metrics, Amazon has a clear dominance with well over 55%. Therefore, investors are bullish on the future of eCommerce retail funds that invest in the e-tail behemoth.


The next fund on our list, the ProShares Online Retail ETF (NYSE:ONLN), invests in global retailers that mainly sell online or via other non-store channels. The fund was first listed in July 2018, and net assets stand at $87.6 million.



ONLN, which tracks the ProShares Online Retail Index, holds 38 stocks. Over three-quarters of the companies are based in the US. Then come stocks from China, Taiwan, Brazil, Mexico, South Korea, the UK, and Israel.


More than 60% of the fund is in the top 10 stocks. Readers may be interested to know that Amazon is the leading stock (26.11%) on the roster, followed by Chinese heavyweights Alibaba (NYSE:BABA) and JD.com (NASDAQ:JD); eBay (NASDAQ:EBAY); healthcare apparel and lifestyle brand e-tailer Figs (NYSE:FIGS); Chewy (NYSE:CHWY), the pure-play e-commerce name that focuses on pet food and products.


As a result of the tailwinds during the pandemic months, ONLN saw an all-time high in July 2021. However, since January, the ETF has lost almost 40% of its value. It is also down 53.9% in the past 52 weeks.

Trailing P/E and P/B ratios are at 42.425x and 7.42x. Those investors whose portfolios can handle short-term volatility can consider buying the dip in ONLN.


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