There is a saying that life is what happens while you’re busy making other plans. Investors understand all too well the truth behind that statement. Sometimes we can miss out on significant gains in a sector or sectors because we start chasing the shiny object.
In 2020 and into 2021, one of those perhaps overlooked stories has been the strength of retail stocks. Yes, it was easy to see the strength in companies like Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT). But there have been other retailers that weathered the pandemic well and continue to post strong numbers in 2021.
A theme among all these retail stocks is a strong e-commerce presence. Consumer habits changed during the pandemic. While it’s too early to say that this change is permanent, it could very well be the case. And if so, the companies that have established their e-commerce credentials stand to benefit in a post-pandemic world.
As retailers continue to report earnings, here are three retail stocks that you should be watching.
L Brands (LB)
L Brands (NYSE:LB) is the company best known for brands such as Bath & Body Works and Victoria’s Secret. LB stock has had a 451% gain in the trailing 12 months. And with analyst sentiment in the company’s favor, it looks like the run still has some room to go.
The company just received an upward revision in its earnings estimate from 98 cents to $1.25. Analysts generally only do this when they see favorable trends. The company is also forecast to deliver revenue of $2.89 billion. Both numbers would be significant year-over-year improvements over 2020. But more importantly, they would be an improvement over the numbers the company posted in the same quarter in 2019.
Interestingly, the company recently announced that it would spin off Victoria’s Secret and Bath & Body Works into two publicly traded companies. L Brands had previously investigated selling the Victoria’s Secret business but the deal fell through during the pandemic. At the time, Victoria’s Secret was valued at $1.1 billion.d
L Brands reports earnings after the market closes on May 19.
The TJX Companies (TJX)
The TJX Companies (NYSE:TJX) is the parent brand of several off-price apparel and home fashion brands including T..J. Maxx, Marshalls, and HomeGoods. The company is planning to open 122 new stores in 2021 and it may have some success since its stores are not tied to mall locations.
TJX stock is up approximately 45% in the last 12 months and is approaching its 52-week high. And the company does pay a modest dividend that it did increase by three cents at the end of 2020.
As with L Brands, earnings estimates for TJX got a slight bump from analysts in advance of its earnings report. If the company hits that number it will deliver 29 cents EPS on revenue of $8.38 billion. If TJX stock can rise to analysts’ high target price of $90, it has 25% upside potential.
The TJX Companies reports earnings before the market opens on May 19.
Target (NYSE:TGT) made a pivot towards e-commerce and omnichannel operations prior to the pandemic. Needless to say the move has paid off for the company. Customers continue to respond favorably to Target’s contactless Drive Up and Order Pickup.Plus, the company was already offering same-day delivery via Shipt prior to the pandemic.
The TGT stock price is up 65% in the last 12 months and investors also enjoy a higher total return by reinvesting the company’s dividned. And speaking of that dividend, Target is a Dividend King that just increased its dividend for the 50th consecutive year.
If you want to find one area of concern, you might point to the 12-month price target that suggests the stock may fall approximately 10%. However with Target receiving bullish earnings upgrades prior to earnings, it’s likely that this price target will move higher as well.
Target reports earnings before the market opens on May 19.
Featured Article: How interest rates affect municipal bond prices7 Cyclical Stocks That Can Help You Play Defense
A cyclical stock is one that produces returns that are influenced by macroeconomic or systematic changes in the broader economy. In strong economic times, these stocks show generally strong growth because they are influenced by discretionary consumer spending. Of course, that means the opposite is true as well. When the economy is weak, these stocks may pull back further than other stocks.
Cyclical stocks cover many sectors, but travel and entertainment stocks come to mind. Airlines, hotels, and restaurants are all examples of cyclical sectors that do well during times of economic growth but are among the first to pull back in recessionary times.
Why do cyclical stocks deserve a place in an investor’s portfolio? Believe it or not, it’s for the relative predictability that they provide. Investors may enjoy speculating in growth stocks, but these are prone to bubbles. This isn’t to say that cyclical stocks are not volatile, but they offer price movement that is a bit more predictable.
In this special presentation, we’re looking at cyclical stocks that are looking strong as we come out of the pandemic. And some of these stocks held up well during the pandemic which means they’re starting from a stronger base.View the "7 Cyclical Stocks That Can Help You Play Defense "
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