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Online Shopping ETF Has Post-Pandemic Utility

(Benzinga) – – E-commerce and online retail equities and the related exchange-traded funds are among the biggest beneficiaries of the stay at home orders forced by the coronavirus pandemic.

What Happened: Up more than 73% year-to-date, the ProShares Online Retail ETF ONLN 3.34% is one of the stars among online retail ETFs, indicating that last week’s 6% pullback could be a buying opportunity.

ONLN follows the ProShares Online Retail Index. The fund is top-heavy, but in this case, that’s alright because “top-heavy” means a combined weight of almost 36% to Amazon AMZN 3.77% and Alibaba BABA 1.16% at the end of the second quarter.

Why It’s Important: As many investors already know, Amazon, Alibaba and a slew of other ONLN components were soaring prior to the coronavirus pandemic, stealing market share from brick-and-mortar retailers in the process. The pandemic is merely speeding along the ascent of e-commerce, packing years worth of altered consumer behavior into a matter of months.

“The US Census Bureau recently released their e-commerce report for the 2nd quarter of 2020, the first quarter that felt the impact of the pandemic in its entirety,” said ProShares Global Investment Strategist Simeon Hyman in a recent note. “The report showed a dramatic increase in both total e-commerce sales as well as penetration. Though the second quarter total retail sales declined 3.9% from the first quarter, E-commerce sales increased 31.8%.”


Data confirm investors are buying into the online shopping thesis. Year-to-date, ONLN has hauled in nearly $200 million in new assets. That’s impressive for any thematic ETF, but even more so when considering ONLN is just over 2 years old and has $308.17 million in assets under management, meaning 2020 is proving to be an epic year for the ProShares ETF.

What’s NextVital to the ONLN thesis is that bullishness won’t evaporate when COVID-19 is finally defeated.

“It is tempting to chalk this up to a temporary impact of the pandemic, but there are signs that this pandemic is accelerating an existing long-term trend and furthering opportunities for e-commerce growth,” notes Hyman. “One glaring example: e-commerce food and beverage sales increased over 100% from the first quarter, and over 220% over the second quarter of last year.”

Adding to the longer-term case for ONLN is that new consumer habits often prove hard to break, as is being seen in this back-to-school shopping.

“With students in some states already back in school and others preparing to return to school, families are expecting to spend a combined record breaking $33.9 Billion to get their children ready, with a new record of 37% of that spending occurring online,” said Hyman. “As such, new habits – in previously underpenetrated categories – may be hard to break.”.


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