October Retail Sales Steady: 4 ETF & Stock Picks

The U.S. retail sector continues to feel the bounce from hurricanes. Sales increased 0.2% sequentially in October 2017, slightly higher than market expectations of no change and after a upwardly revised 1.9% jump in September. On a year-over-year basis, retail sales rose 4.6% following 4.8% gains recorded in September.

Hurricane Harvey flooded Texas at August-end and Irma demolished Florida in early September. So, purchase of new cars, higher replacement demand and a pickup in economic activity was understandable post hurricanes (read: ETF & Stocks to Buy on Rebounding September Auto Sales).

Out of the 13 key sectors, nine registered expansion last month. Below we recommend a few ETFs & stocks that are likely to be the prime beneficiaries of this retail sales improvement.

Auto

A pickup in sales among auto dealerships was noticeable in October, with a 0.7% increase following a 4.6% rise in September. Hurricane Harvey dented thousands of new vehicles that were in dealership lots, according to an analysis from Edmunds. Those new cars and trucks were probably ‘scrapped,’ resulting in fresh demand for new vehicles. First Trust NASDAQ Global Auto Index Fund CARZ can thus gain ahead (read: Harvey: Pain or Gain Ahead for Auto Stocks and ETFs?).

Investors can also have a look at Zacks Rank #1 (Strong Buy) American Axle & Manufacturing Holdings Inc. AXL. The company is a manufacturer of drivetrain systems and related components. The Zacks Industry Rank of the stock is in the top 20%. It has a VGM (Value, Growth, Momentum) Score of A.

Clothing Vendors

Sales also increased at clothing vendors (up 0.8% in October versus 0.1% in September). Consumers probably started eyeing the holyday season. The National Retail Federation expects retail sales to grow between 3.6% and 4%, totaling $678.75 billion to $682 billion in the November-December period. In any case, this time, Halloween spending probably have jumped three times in the last 12 years (read: No Trick, 4 Halloween ETF & Stock Treats for Investors (Revised)).

This should benefit VanEck Vectors Retail ETF RTH. Coming to stocks, American Eagle Outfitters Inc. (AEO) can be a good pick. The Zacks Industry Rank is in the top 41%. It is a specialty retailer of all-American casual apparel, accessories, and footwear for men and women. The stock has a Zacks Rank #2 (Buy) and a VGM Score of A (read: Online vs. Offline Retail: Recent ETF Winners).

Electronics and Appliance

Sales for electronics and appliance shot up 0.7% following a 0.3% gain in September. In any case, Electronics is likely to be the top 2017 Black Friday bargains, as per analysts. Salesforce expects Black Friday to be “the busiest digital shopping day” in the history of the United States, surpassing Cyber Monday, as the U.S. digital shopping day for the second consecutive year (read: 3 ETFs to Tap Upbeat Electronics Sales Forecast).

Higher demand from emerging technology applications like tablets and smartphones is a tailwind to the semiconductor space. If this was not enough, NPD Group analyst Mat Piscatella indicated that game sales are likely to see a “nice rebound this year” from last year's unsatisfactory numbers, thanks to a host of “hot titles and new consoles.”

This should boost funds like VanEck Vectors Semiconductor ETF SMH and ETFMG Video Game Tech ETF GAMR. As far as stocks are concerned, investors can take a look at Methode Electronics Inc. MEI. The stock has a Zacks ETF Rank #1 and a VGM Score of B. The Zacks Industry Rank is in the top 3%.

Restaurants

Sales at restaurants and bars increased 0.8% versus 0.1% last month. This may benefit PowerShares Dynamic Food & Beverage Portfolio PBJ. Investors can also take a look at Zacks Rank #2 Cracker Barrel Old Country Store Inc. CBRL. The VGM Score is A.

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American Axle & Manufacturing Holdings, Inc. (AXL) : Free Stock Analysis Report
 
Methode Electronics, Inc. (MEI) : Free Stock Analysis Report
 
VANECK-RETAIL (RTH): ETF Research Reports
 
VANECK-SEMICON (SMH): ETF Research Reports
 
PWRSH-DYN FD&BV (PBJ): ETF Research Reports
 
FT-NDQ GL AUTO (CARZ): ETF Research Reports
 
PF-ISE ELEC GMG (GAMR): ETF Research Reports
 
Cracker Barrel Old Country Store, Inc. (CBRL) : Free Stock Analysis Report
 
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