Our company’s short term strategy is to invest in US Retail industry’s top performing stocks. We are specifically targeting the high retail stock returns during this US holiday season.
The US Retail Industry
The National Retail Federation (NRF) estimates that U.S. retail sales will rise 3.9% during this holiday season, overshadowing last year’s growth of 3.5%. Sales during the months of
November and December are estimated at $602.1 billion. NRF also forecasts a 13%-15% rise in online holiday sales to $82 billion, stronger than the 11.1% growth seen during the 2012 season. Stocks selected
Companies we chose to invest in are Walmart, Target, Macys, Amazon. These retail companies have been around for years, and doing good business. Moreover these companies are industry leaders who’re giving higher returns compared to its peers in the industry.
Performance of selected companies in the Retail Industry
Walmart holds on to the top spot in the annual ranking of the 50 most valuable U.S. retail brands in 2013 with its brand valued at $141 billion. By comparison, the second-highest ranked
U.S. brand, Target Corp., has a brand value of $25 billion. Amazon.com has moved up to number four on the list, growing its brand value by 46%. Macy’s was the biggest riser, increasing brand value by 62% this year.
The Blue Chip Investment Company
Metrics used to select the Retail stocks:
1. Examine Company stores & promotional activities
2. Gross Margin Trends
3. Sales-Per-Square-Foot Data – reliable indicator of how good management is at using store space and allocating resources, the higher the sales-per-square-foot the better.
4. Inventory/Receivable Trends - if inventories are growing at a faster rate than revenues, it may indicate that the company is unable to sell certain merchandise.
5. Calculate and Compare Price to Earnings Ratio vs. Expected Earnings Growth Rates
6. Company’s geographic footprint
Current Risks in the Retail Industry:
1. The government shutdown and the ongoing political tussle, uncertain economic recovery, and soft job opportunities are having an adverse impact on retail customers.
The main challenge we see is low spending from the customers during this holiday season. 2. As 2013 presents only 25 days between Black Friday and Christmas as against 31 days last year, we will have only 4 full weekends this time versus 5 in 2012 which can impact holiday sales.
Company Background of selected stocks
1. Wal-Mart Stores, Inc. is the largest retailer, second largest public corporation and the biggest private employer in the world. The Walmart stock is bullish with a median target share price of 82 and high target of 90 by the end of 2013.
2. Target Corporation is the second-largest discount retailer in the United States. The company is ranked 36th on the Fortune 500 as of 2013 and is a component of the
Standard & Poor's 500 index. The Target stock is bullish with a median target price of 70 and high target of 83 by the end of 2013.
3. Amazon.com, Inc. is the world's largest online retailer. Amazon.com started as an online bookstore, but soon diversified, offering millions of unique new, refurbished, and used items in various categories. The Amazon stock is bullish with a median target of 400 and a high target of 460 by the end of 2013.
4. Macy’s, Inc. is one of the