ETF 360: Q&A with ProShares’ Simeon Hyman

For this episode of “ETF 360”, VettaFi Head of Research Todd Rosenbluth spoke with Simeon Hyman, CFA, Global Investment Strategist and Head of the Investment Strategy Group at ProShares, about the ProShares Online Retail ETF (ONLN).

Pre-pandemic sales via e-commerce accounted for just 12% of all retail sales in the United States, a number that increased during the pandemic to 17% and has since declined to 14%. However, the percentage of e-commerce market share shows continued growth along its trend of around 1% per year before the pandemic, and 14% aligns with this growth trend.

“Even if retail sales are flat, you’re talking about a 30-40% increase in e-commerce sales over the next four or five years,” Hyman explained.

The precedent has long been set in trying to capture consumer interest through special sale days, such as Nordstrom’s Anniversary Sale, Macy’s One Day Sale, and Amazon Prime days continue this trend. in the online space, but it’s not so much about sales as it drives customer growth.

“If we think of Prime Day in the context of Amazon’s business, they made about $11 billion last year; that equates to, and even if you cancel the cloud, that equates to maybe 10-12 average selling days for Amazon,” Hyman explained. “Certainly as a metric, as a marketing activity to attract new Prime users, it is important, but balanced in its importance.”

Amazon competes globally with Chinese giant Alibaba, Singapore-based Sea Limited, and South and Central America’s MercadoLibre. All of these companies are carried within the ProShares Online Retail ETF (ONLN), which has a global portfolio of 25% ex-US companies and 75% US companies, all of which must have a market capitalization of $500 million.

The index is market capitalization weighted and individual stocks are capped at 25%.

“If there’s one business where scale matters, it’s online retail, so you have to recognize that the bigger you are and the bigger your market cap, you should have a bigger share of the wallet. “Hyman said.

ONLN can fit into portfolios in a number of ways, but two primary uses are as a thematic satellite or as a representative consumer discretionary sector sleeve for a portfolio. Access to this particular space is particularly attractive now, given the discounts at which e-commerce securities and the fund are trading.

“Right now you’re talking about a substantial discount,” Hyman explained. “ONLN trades at just 40% of the price-to-book ratio of the consumer discretionary sector. »

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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