RETAIL HOLDERS TRU DEP RCPT REP 20 RETAIL CO'S (AMEX:RTH)

NetscribeETF (37.64) Submitted: 3/23/2007 8:26:37 AM : Start Price: $33.05 RTH Score: +27.13

The Retail HOLDRS represent stocks that sell retail merchandise to consumers through traditional retail stores, the Internet, mail order catalogs and other outlets. With total net assets worth approximately $480 million it is trading with a price to book value of 2.86x and a price to earnings multiple hovering around 17.

Not much diversification is offered by the fund with just 18 companies and an individual analysis of the top six holdings that account for about half the funds corpus would help get a better picture of its future prospects. With about 85% of the American household already shopping in Wal-Mart it is looking for a more balanced approach to growth concentrating to improve its return on investment. Costco Wholesale dominates the growing niche of warehouse club retailing with strong membership renewal rates. Target has been able to differentiate itself from other attracting a more affluent customer base and its new sourcing initiative has helped it gross higher markups and stabilizing margins. The sole drug retailer CVS would benefit from the aging population and increased sale of generic drugs.

Even the presence of Home Depot and Lowes who fortunes are tied to the housing market does not seem to hinder the growth prospects of the fund. Future growth prospects of the specialty stores look mixed and depends on the individual prospects of the merchandise they sell ranging from luxury items such as jewelry to less discretionary items such as apparels and office supplies. Food retailer’s like Kroger would benefit from the recently renegotiated labor contracts and their ability to differentiate their service and products offerings Though rising energy cost, lackluster employment growth don’t favor the retail sector in general the individual components of the fund have excellent growth prospects that can steer the funds performance for another positive year.