Retail sales are likely to rise this holiday season over last year — and that could mean a boost for some retail-oriented mutual funds.
According to research from S&P Capital IQ, holiday retail sales should be up 3% to 4% this year over last. Should this forecast bear out — and so far it’s on track — investors might want to consider looking for high-ranked mutual funds that are heavily weighted in retail stocks, according to the report.
S&P Capital IQ identified three such funds of the 7,500 U.S. funds it ranks. They are: Fidelity Select Retailing Portfolio (FSRPX); ICON Consumer Discretionary Fund, class S (ICCCX); and Rydex Retailing Fund, investor class (RYRIX).
The Fidelity retailing fund has outperformed peers in the consumer services group over one-, three- and five-year periods, with more than 700 basis points of outperformance over the three-year period, according to the report. The fund has a higher risk-adjusted return than its peers, and, with an expense ratio of 0.9%, is also well below its peer group’s 1.6% ratio. Recent top-10 holdings have included Priceline, Bed, Bath and Beyond, Hasbro, Limited Brands and Staples.
The ICON fund, while more broadly diversified across the consumer discretionary sector, still has several retail-oriented companies in its top 10 holdings. This fund also has strong past performance, according to S&P Capital IQ, as well as strong performance year-to-date (8.4% versus -1.4% for the peer group). Recent top 10 holdings have included stocks such as Walt Disney, Nike and Target.
Rydex Retailing Fund has more than 80 companies in the fund. S&P said in its report that it does not believe the greater diversification has hurt the fund’s returns — in fact, the year-to-date return has been 4.1%, versus -1.4% for the peer group. The fund has a high turnover rate, but the expense ratio is still a shade below its peer group, at 1.4% (the peer group is 1.6%). Recent top-10 holdings have included CVS Caremark, Priceline and Walmart.
Danielle Reed writes for Financial Planning.