Get Premium to unlock powerful stock data

What Retail Stocks Should Be in Your Portfolio's Stocking?

Be careful with consumer-based equities this year

Author's Avatar
Dec 08, 2021
Summary
  • Supply chain issues and slimmer margins are affecting some of these options.
  • Consumers' changing shopping patterns are also a concern.
  • Most listed here are buy and hold at best.
Article's Main Image

Right now, you may be making a holiday shopping list for gifts for your friends and family, not stocks to add to your portfolio.

However, the holiday season is a great time to look at stocks related to gift-giving and shopping. Are these well-known names stocks you’d want under your own Christmas tree? Let’s look.

Amazon

Amazon.com Inc. (

AMZN, Financial) may be the sleigh that brings Christmas for many, but is it a buy right now? A drop in price in October makes the stock more affordable. Amazon is also making investments in warehouses, some free-standing Amazon stores, new products and in Amazon Prime since it purchased Metro-Goldwyn-Mayer. The price-earnings ratio is a little high right now, but its price is closer to its lows. Given its growth potential, Amazon might be a good portfolio addition.

Target

While Target Corp. (

TGT, Financial) beat earnings estimates, the retailer’s profit margin has slipped below 30%, which prompted its recent dip in price. Some analysts are rating Target as a stock for holding right now because of that slide in margin. GuruFocus rates it as a 6 out of 10 in profitability.

Costco

Costco Wholesale Corp. (

COST, Financial) is where plenty of families purchase their holiday dinners and more, but should it be in your portfolio as well as your pantry? Costco stock has had a nearly flat year, GuruFocus writer Nathan Parsh reports. Still, steady growth, expansion and financial stability make it a possible portfolio addition.

Walmart

Walmart Inc.’s (

WMT, Financial) stock price has been challenged since 2020, but this might make the retailer one to consider adding to your investments. It made its third-quarter profit goals, and holiday shopping should give it a positive fourth quarter.

Macy's

Macy’s Inc. (

M, Financial) may be best known as a department store, but the company has also created strong e-commerce options for shoppers. Macy's has come back from the low stock prices of 2020, but GuruFocus’ financial strength rating of 4 out of 10 should give an investor pause on buying this stock.

Kohl's

Shoppers love using their Kohl’s cash when buying holiday gifts, but will Kohl's Corp.'s (

KSS, Financial) stock bring investors cash? The company has experienced 17 percent average annual growth in e-commerce over the past five years, and it has a wide enough network of stores in-person shopping growth and in-store pickup of online orders. GuruFocus gives Kohl's a financial strength rating of 4 out of 10, which is concerning, and brands Kohl’s carries, such as Nike (NKE, Financial), are boosting their own direct-to-consumer sales.

The bottom line

While many of us have a holiday shopping list, this may not be the year to add retailer stocks to investments. Supply chain issues affecting products and snags in transportation will likely affect these companies.

A better option for investing in consumer-driven stocks this year is purchasing shares in an exchange-traded fund with a consumer focus such as the Consumer Staples Select Sector SPDR Fund (

XLP, Financial). The ETF tracks consumer staples stocks, giving investors a broader exposure to the sector, but in the past year, it’s underperformed ETFs that track the S&P 500.

Late 2021 may not be the best time to purchase consumer stocks or ETFs unless you plan to hold them for several years, allowing enough time for supply chain issues and changing consumer patterns to play out.

Disclosures

I am/we are Long XLP
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com
Rating:
0 / 5 (0 votes)
Author's Avatar
WRITTEN BY

GuruFocus Screeners

Related Articles

Q&A with Gurus