The Pacer Benchmark Industrial Real Estate SCTR ETF (NYSE: INDS) was a scintillating performer among real estate exchange traded funds last year, returning 46.9% while leaving traditional, diversified rivals in the dust.
While past performance is not guaranteed to repeat, the stage is set for 2020 to be another year of e-commerce growth and as the premier home to the companies that are backbones of the online shopping boom, INDS could again be a leader among real estate ETFs this year.
“INDS is the best way to capitalize on the growth of e-commerce, cannabis and cold storage,” according to Benchmark Investments, the index provider for INDS. “The insatiable demand to receive packages in a day or less has led to an era of 'last mile' revolution. It's an arms race for space.”
Why It's Important
When it comes to tapping the e-commerce boom, many investors look to the likes of Amazon.com (NASDAQ: AMZN), Shopify (NYSE: SHOP) and related fare and reasonably so. As the 2018 holiday shopping season confirms, INDS can actually be a superior avenue to e-commerce investment returns. During that period, INDS toppled the S&P 500 and pure play e-commerce ETFs.
“INDS Index has demonstrated that the way to play the growth of eCommerce, which is set to double over the next ten years, is through the distribution centers and logistics facilities,” according to Benchmark. “Amazon, and other eCommerce players, have announced that they will invest in their warehouses to reach their target populations in a day or less.”
Benchmark notes that many INDS components are targeting earnings growth of 10% to 12% this year, levels that if met or exceeded could propel the ETF higher. Many of those firms are aiming for dividend yields of 2% to 3% or more. INDS yields 1.78%, implying ample room for growth.
In 2020, e-commerce is expected to continue pilfering business from brick-and-mortar retailers and that should facilitate more growth for INDS components.
“Anecdotal evidence suggests that this is true, but a recent CBRE Research study found that for each incremental $1 billion growth in e-commerce sales, an additional 1.25 million sq. ft. of distribution space is needed to support this growth,” according to CBRE.
Photo credit: Álvaro Ibáñez, via Wikimedia Commons