September typically means its back-to-school time. For hundreds of millions of young minds, returning to school after the coronavirus lockdown will likely be exciting. For others it might require some additional prep and supplies, or more after school tutoring.
Therefore today we will look at two exchange-traded funds (ETFs) that may be appropriate for investors who would like to benefit from the current school season's dynamics.
Shopping For School In 2020
As students get ready to start a new academic year, teachers, administrators, students as well as parents will have questions about how to balance social-distancing with online and face-to-face education.
Which also means shopping for the back-to-school season is likely to be somewhat different than in previous years. Typically, school-shopping is the second busiest time of the year for retailers, after the winter holidays. Yet the pandemic has upended the usual routine for most consumers and businesses.
In addition to shopping for regular school items, another theme is increasingly emerging, i.e., the role of technology in education. Like so many aspects of our lives right now, students and most individuals will need to become more technologically savvy. This will require both skills and access to up-to-date machines, such as laptops, smartphones, and other accessories.
According to a 2018-report titled "The Next Era of Human|Machine Partnerships," published by Palo Alto, California-based The Institute for the Future:
"By 2030, populations' needs and resources will be orchestrated by self-learning, digital technologies, allowing humans to take the role of digital resource conductors. Technology will work as an extension of people, helping orchestrate, manage, and automate many day-to-day activities."
This new decade will potentially see education evolve in such a way that students and employees would need to become ready to not only survive but also thrive in the technological revolution.
With all that information, let's take a closer look at two appropriate funds.
1.Global X Education ETF
- Current Price: $15.70
- 52-Week Range: $14.51 - $17.18
- Expense Ratio: 0.50 % per year, or $50 on a $10,000 investment
The Global X Education ETF (NASDAQ:EDUT) invests in companies providing products and services that facilitate education, including online learning and publishing educational content, as well as those involved in early childhood education, higher education, and professional education.
EDUT, which tracks the Indxx Global Education Thematic index, has 36 holdings. The sector allocation (by weighting) is Consumer Discretionary (48.3%), Information Technology (23.6%), Communication Services (15.0%), and Industrials (13.1%).
The top ten holdings make up 67.8% of EDUT's total net assets, which stand at $5.43 million. EDUT's top five companies are GSX Techedu (NYSE:GSX), TAL Education Group (NYSE:TAL), New Oriental Education & Technology (NYSE:EDU), Zoom Video Communications (NASDAQ:ZM) and Bright Horizons (NYSE:BFAM).
The fund started trading only on July 15, at an opening price of $14.91. So far, in its six weeks of trade, it is up around 6%. Potential investors may want to do due diligence on the fund's holdings to see if EDUT should belong in their long-term portfolio.
Further research into these companies will show that most are leveraging technology to reduce costs and broaden access. A number of them are offering supplementary education services, typically by fulfilling unmet demand, especially given the pandemic's reality.
With respect to back-to-school shopping, here’s a fund that may pique investors’ interests.
2.VanEck Vectors Retail ETF
- Current Price: $152.01
- 52-Week Range: $94.61 - 152.91
- Dividend Yield (TTM-Trailing Twelve Month): 0.72%
- Net Expense Ratio: 0.35 % per year, or $35 on a $10,000 investment
The VanEck Vectors Retail ETF (NYSE:RTH) invests in companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, and food and other staples retailers.
RTH, which tracks the MVIS US Listed Retail 25 index, has 25 holdings. Sector allocation (by weighting) is Consumer Discretionary (69.5%), Consumer Staples (21.7%), and Healthcare (8.8%).
The top ten holdings make up 73.64% of RTH's total net assets, which stand at $159.4 million. The index methodology favors the largest companies in the industry. Thus the top five companies are Amazon (NASDAQ:AMZN), Home Depot (NYSE:HD), Walmart (NYSE:WMT), Lowe's (NYSE:LOW) and Costco Wholesale (NASDAQ:COST).
It is likely that most households will shop online as well as in stores. Due to social distancing, parents or caretakers may decide not to bring young children into stores or malls, which may result in a different shopping pattern than during previous Septembers. Also, consumers will likely buy more gadgets, electronic items, and computers, rather than clothing or stationery.
So far this year, RTH is up over 26%. It hit an all-time high on Aug. 27. The run-up in the share price since early spring is overextended. As a result, short-term profit-taking is likely. Long-term investors may consider buying the dips, especially if the price declines below $145.