Wal-Mart Suppliers ETF: WSI

With consumers cutting back on excess spending and stimulus checks in the mail, the investment case for Wal-Mart (NYSE: WMT) looks strong.

Analysts are positive on the company’s outlook, pointing to improved cash flow and better merchandising of private label clothing.

Per the chart below, the stock is up nearly 20% since the beginning of the year.

Now is also the time to revisit the Wal-Mart Suppliers ETF (NYSEArca: WSI) launched by FocusShares last year. WSI tracks an index of 30 companies that supply Wal-Mart and derive a substantial portioin of their revenue from the mega-retailer.

Top holdings include such household names as Hasbro (NYSE: HAS), General Mills (NYSE: GIS), Kellogg (NYSE: K), Mattel (NYSE: MAT) and Activision (Nasdaq: ATVI).

The logic of holding the Wal-Mart Suppliers ETF instead of the retailer is that you get exposure to Wal-Mart’s growth while reducing risk with a diversified portfolio.

The concern with this ETF is the small size ($4.5 million according to Yahoo finance) and lack of active trading which can drag down returns due to larger bid-ask spreads and potential tracking error.

For more information, see the FocusShares website.

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