Money is starting to flood into exchange-traded funds that focus on media and retail companies, marking a rebound for this year’s worst-performing ETF industry group as U.S. economic growth revives consumer demand.
Investors pumped $1.79 billion into consumer discretionary exchange-traded funds in the five trading days through Aug. 6, the most of any group, according to data compiled by Bloomberg. The funds have still seen $2.04 billion flow out this year, also the most among the different industries.
“It’s been the worst sector, but the economic picture is improving,” Todd Rosenbluth, director of ETF research at S&P Capital IQ in New York, said in an interview. “It’s one of those sectors that should do well.”
The recent turnabout suggests investors are more confident the economy will improve and boost profit for companies such as Starbucks Corp. and Comcast Corp. in this year’s second half. Ralph Lauren Corp. and Walt Disney Co. this week both reported quarterly earnings that exceeded analysts’ estimates, and Rosenbluth said the opportunity for consolidation and acquisitions could also spur investors.
ETFs, which allow investors to trade shares representing a broader index of stocks, are gaining popularity as a way to invest in industries such as apparel, restaurants and entertainment without having to buy multiple equities.
Even with this year’s outflow, the consumer-discretionary funds remain the best performing group in the bull market that started in March 2009.
Biggest ETF
The Consumer Discretionary Select Sector SPDR Fund -- which includes Burbank, California-based Disney as the biggest of its 84 reported holdings -- is the largest U.S.-based ETF focused on the consumer discretionary companies. The fund accounted for $1.38 billion of the inflow over the past week. Among its top 10 reported holdings are Time Warner Inc. and Twenty-First Century Fox Inc., whose potential combination was scuttled this week when Fox gave up the pursuit.
Disney, Time Warner and Fox this week all reported quarterly earnings that exceeded estimates.
Improvements in the economy should also benefit companies that rely on consumers spending money on goods and services that aren’t necessities. Gross domestic product rose at a 4 percent annualized rate from April through June, exceeding estimates, after shrinking 2.1 percent in the first quarter, the Commerce Department said July 30.