It's no secret that online retail is surging.
Exchange-traded funds tracking the theme have made major strides this year and are among some of 2020's best-performing funds in the market.
Here are some top e-commerce ETFs' year-to-date gains:
- The ProShares Long Online/Short Stores ETF (CLIX) is up 88%
- The ProShares Online Retail ETF (ONLN) is up 87%
- Amplify's Online Retail ETF (IBUY) is up 80%
- The Global X E-commerce ETF (EBIZ) is up 55%
- The Emerging Markets Internet and E-commerce ETF (EMQQ) is up 49%
However, concerns are swirling around whether these ETFs or some of their underlying stocks are overbought. Amazon, up over 78% this year, is a top holding in both of ProShares' funds.
"No matter how you slice it, online retail is expensive right now," Dave Nadig, chief investment officer and director of research at ETF Trends and ETF Database, told CNBC's "ETF Edge" on Monday, adding that ONLN's price-earnings ratio was hovering around a sky-high 180 times.
But not all online retail is created equal and some plays in the space remain more attractive than others, Nadig said.
For example, CLIX, which invests in online retail names including Amazon, Alibaba, Overstock and Wayfair for the long term and short sells brick-and-mortar names, has faced some obstacles in 2020, he said.
"That short position includes things like Tractor Supply Co. and Home Depot, both of which are up enormously this year because not everything has gone online," he said. "There is this narrow corner of brick-and-mortar retail that's actually had a phenomenal year so far. So, that hasn't worked for you as well as you'd want."
ONLN similarly holds huge positions in Amazon and Alibaba — 22% and more than 10%, respectively — so Nadig preferred an ETF outside the ProShares family.
"In this environment, I think I might like something like IBUY," he said. "It uses sort of an equal-weighted scheme, so, Amazon only gets to be about 2.5% of that portfolio. I think that can help mitigate some of the overbought concerns people have about the names at the top of the list here."
Chris Hempstead, director of institutional business development at IndexIQ, said much of what's driving e-commerce ETFs to new heights was in place before the coronavirus.
"Even before this shift for a lot of people to being forced into an online merchandising environment, there was already a strong tendency to use services like Amazon and other online retailers," he said in the same "ETF Edge" interview. "We were seeing that demand pre-Covid anyway. I think Covid just gave it a little bit of a fuel injection, in a sense."
If anything, the recent surge was more of a burst of "irrational exuberance" than a moonshot into overbought territory, he added.
"Long term, I think this is the future of e-commerce, the future of how people are going to be doing business," he said. "I think even if Covid were to miraculously go away and we get life back to normal, I think online retailing is going to be here for the long haul. So, in terms of a core allocation, I do think that those stocks are going to continue to perform well."
CLIX, ONLN, IBUY and EMQQ were all higher in early Wednesday trading. EBIZ fell less than 1%.
Disclosure: CNBC parent Comcast-NBCUniversal is an investor in Peloton.