Consumer spending, which is a major driving force in U.S. economic growth, declined significantly last year. Job losses and deep declines in personal income caused by coronavirus pandemic greatly reduced people’s discretionary spending. Indeed, in 2020 U.S. residents spent approximately $583 billion less on durable and non-durable goods and services than in the prior year.
Consumer spending has started to pick up now, however, with the disbursement of two coronavirus stimulus packages by the government last year, and in anticipation of the imminent passage of a third, $1.9 trillion, recovery package.
Because the economy has begun reopening quickly, the accompanying labor market improvement and rising personal income are driving a solid increase in spending. As noted by Aneta Markowska, chief economist at Jefferies, personal consumption expenditure (PCE) is expected to grow 7% this year and 4.1% in 2022. Furthermore, the passage of the latest $1.9 trillion recovery package will deliver to Americans direct payments of up to $1,400, much of which is expected to be spent quickly.
However, we think it could be risky for investors to seek to gain from the anticipated spending boom by investing directly in stocks, given the level of prevailing uncertainty in the market. Rather, we think it wise to invest in these ETFs: U.S. Global Jets ETF (JETS), Invesco Dynamic Leisure and Entertainment ETF (PEJ), and VanEck Vectors Gaming ETF (BJK). They offer diversified exposure, which reduces risk significantly.
U.S. Global Jets ETF (JETS)
JETS, which is managed by U.S. Global Investors Inc., is the only pure-play air travel ETF in the market. The fund is diversified across market capitalization and is focused on the stocks of companies operating across the transportation, air freight and logistics, and airlines sectors.
The fund seeks to track the performance of the U.S. Global Jets Index by using a full replication technique. The ETF’s top three holdings are Southwest Airlines Co. (LUV), American Airlines Group, Inc. (AAL) and Delta Air Lines, Inc. (DAL), with weightings of 10.87%, 10.47%, and 9.86%, respectively.
JETS has an $3.74 billion in AUM and an expense ratio of 0.60%, versus the category average 0.42%. The fund pays $0.01 in dividends annually, yielding 0.04% at its current price. JETS has gained 19% year-to-date and 45.9% over the past six months.
JETS has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. JETS has an A grade for Trade and Buy & Hold. In the B-rated 32-ETF Industrials Equities ETFs category, the ETF is ranked #4.
Note that JETS is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Invesco Dynamic Leisure and Entertainment ETF (PEJ)
PEJ invests in the stocks of companies that operate across consumer discretionary sectors that include media and entertainment, retailing, distributors, durable goods distribution, leisure equipment and product distribution, and communication services. The fund’s portfolio comprises only approximately 30 stocks that are weighted relatively evenly in the portfolio.
The fund tracks the performance of the Dynamic Leisure & Entertainment Intellidex Index, using a full replication technique. The ETF’s top three holdings are ViacomCBS Inc. Class B (VIAC), Discovery, Inc. Class A (DISCA) and Walt Disney Company (DIS) with weightings of 6.2%, 6.07%, and 4.89%, respectively.
PEJ has $1.59 billion in AUM and an expense ratio of 0.63%, versus the category average 0.49%. The fund pays $0.37 in dividends annually, yielding 0.74% at its current price. PEJ has gained 26.2% year-to-date and 53.6% over the past six months.
It’s no surprise that PEJ has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. It also has an A for Trade Grade, Buy & Hold Grade, and Peer Grade. It is ranked #2 of 45 ETFs in the Consumer-Focused ETFs group.
VanEck Vectors Gaming ETF (BJK)
BJK, which is managed by Van Eck Associates Corporation, is focused on the stocks of companies that operate across consumer discretionary sectors that include: consumer services, hotels, restaurants and leisure, casinos and gaming, gaming operations, online gaming operations, lottery, bingo, bookie and other gaming operations, racetrack betting and gaming operations. The fund holds many securities across related sectors that are not widely represented in many standard portfolios, thereby seeking investment gains from new market slices.
The fund seeks to track the performance of the MVIS Global Gaming Index. Its top three holdings are Las Vegas Sands Corp. (LVS), Galaxy Entertainment Group Limited and Flutter Entertainment Plc., with weightings of 7.42%, 7.36%, and 7.10%, respectively.
BJK has $129.85 million in AUM and an expense ratio of 0.66%, versus the category average 0.49%. The fund pays $0.22 in dividends annually, yielding 0.42% at its current price. BJK has gained 12.9% year-to-date and 39.2% over the past six months.
BJK has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. It also has an A for Trade Grade, Buy & Hold Grade, and Peer Grade. It is ranked #12 out of 45-ETF Consumer-Focused ETFs group.
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JETS shares were trading at $26.71 per share on Wednesday morning, up $0.14 (+0.53%). Year-to-date, JETS has gained 19.35%, versus a 4.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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