5 Defensive Retail Stocks With Good Profitability

Stocks are trading below the Peter Lynch earnings line

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James Li
Oct 02, 2020
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According to the Peter Lynch Growth Screen, five defensive retail stocks that have good profitability and are trading below the Peter Lynch earnings line are The Kroger Co. (

KR, Financial), Big Lots Inc. (BIG, Financial), Hyundai Greenfood Co. Ltd. (XKRX:005440, Financial), Dongwon F&B Co. Ltd. (XKRX:049700, Financial) and Koninklijke Ahold Delhaize NV (XAMS:AD, Financial).

The Peter Lynch Growth Screen is one of several predefined All-in-One Screener templates offered to GuruFocus Premium members. The screen builds on the legendary Fidelity Magellan Fund manager's concept that an undervalued stock trades below 15 times its earnings per share. Other key criteria of the screen include a GuruFocus business predictability rank of at least two stars and a 10-year revenue growth rate of at least 6%.

Dow slips as September jobs report misses estimates

The Dow Jones Industrial Average closed at 27,682.81, down 134.09 points from Thursday's close of 27,816.90 on the back of weaker-than-expected job growth in September.


According to the U.S. Bureau of Labor Statistics, nonfarm payrolls increased 661,000 during September, lagging the Wall Street estimate of nonfarm payrolls increasing 800,000. Declines in government employment and an exodus of workers from the labor force contributed to the lower-than-expected job growth.


Despite the decline in government employment, employment in leisure and hospitality increased 318,000 while retail trade added 142,000 jobs, sectors with notable job growth during September. However, with the coronavirus pandemic situation remaining unstable, the legendary Peter Lynch warned that the price-earnings ratios of cyclical companies could produce misleading relative valuations.

As such, investors may seek opportunities among defensive retail companies, the portion of the retail sector not as sensitive to macroeconomic and business-cycle changes.


Kroger operates a chain of supermarket stores around the U.S. GuruFocus ranks the Cincinnati-based company's profitability 8 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank and a high Piotroski F-score of 8.


Even though Kroger is significantly overvalued based on its GF Value, the company's valuation ranks 6 out of 10 on the back of price-earnings and price-sales ratios outperforming 84.88% and 70% of global competitors albeit price-book ratios underperforming 67.4% of global defensive retail companies.


Gurus with large holdings in Kroger include

Jim Simons (Trades, Portfolio)' Renaissance Technologies and Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial).


Big Lots

Big Lots operates a network of discount retail stores that market a wide range of groceries and home furnishing products. GuruFocus ranks the Columbus, Ohio-based company's profitability 8 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank and a return on assets that outperforms over 99% of global competitors.


Even though the company is just fairly valued according to the GF Value, Big Lots' valuation ranks 9 out of 10 on the back of price-earnings ratios that are near a 10-year low and outperform 99.51% of global competitors.


Hyundai Greenfood

Hyundai Greenfood operates in South Korea's foodservice business. GuruFocus ranks the company's financial strength 8 out of 10 on the heels of debt ratios outperforming over 86% of global competitors.



Dongwon promotes a wide range of food products, ranging from instant-food products to frozen-food products. GuruFocus ranks the company's profitability 8 out of 10 driven on a 3.5-star business predictability rank and three-year revenue and earnings growth rates outperforming over 70% of global competitors.


Koninklijke Ahold Delhaize

Koninklijke Ahold Delhaize operates grocery stores in the eastern U.S. and Europe. GuruFocus ranks the company's profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7, a four-star business predictability rank and an operating margin that has increased approximately 2.80% per year on average over the past five years and is outperforming over 73% of global competitors.


Disclosure: No positions.

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I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!