Monday, November 22, 2010

Playing The Cautious Consumer This Holiday Season

Tomorrow's GDP report will be key to give us an idea to whether we could be expecting a good or not so good Black Friday.  Economists are expecting the GDP to be reported at 2.4%. 

Regardless, there are a few plays that will be winners this holiday season for consumers that are spending less.  I do expect these companies to outperform in the retail sector this holiday season.  Here are your possible plays this holiday season:

  • Best Buy (BBY): Best Buy is a top electronics retail play that does expect a huge holiday season.  The company was upgraded today by Barclays, who share the same opinion, that Best Buy will outperform this holiday season.  The rose their target to $51 and remained their outlook at overweight.  Best Buy was up 3% today on the news.
  • Nordstrom (JWN): Nordstrom is a higher end retail play that is currently pretty cheap with a P/E of 18, ROE of 33% and a dividend yield of 1.9%.  Nordstrom has done a pretty good job of staying ahead of the pack in the higher end retail.  Look for JWN to capitalize on its sales momentum.
  • Wal-Mart (WMT):  WMT is a great low cost retailer especially in this economic climate. Wal-Mart has great deals and savings that should be very attractive for the frugal consumer.  Wal-Mart is the largest offline retailer and they should easily post great numbers this holiday season.  The stock is very cheap at the moment with a P/E of 13, ROE of 22%, P/S of .47.  I like WMT.
  • Amazon (AMZN): With a growing number of consumers looking for better deals online and skipping the crowds at the malls, Amazon, the largest online retailer, will be an obvious choice for consumers.  Amazon and Wal-Mart are in a huge price war this holiday season but I don't see it being a big deal because there will not be a big enough price difference to determine a clear "winner".  They will both be winners in their right.  Amazon will be the winner of online retail.
These companies are the top of the retail sector and will outperform this holiday season.  These companies manufacture success and know their market.  Marketing and deals have been very successful in the past and should have continued success this season.  Consumers are looking for the best deal this holiday season and I think these companies will give them those deals they are looking for.  Stick will Best Buy (BBY), Nordstrom (JWN), Wal-Mart (WMT), and Amazon (AMZN).

Disclosure: Long BBY

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

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