4 Retail Stocks to Buy as Businesses Reopen
- The so-called experts believed that two industries were set to crash in the current recession.
- But they’ve actually soared in the past few weeks.
- Charles Mizrahi breaks down how wrong they were and how you can make money off their terrible call.
The “experts” were wrong again. Who’s surprised? Not me.
I’ve been sharing with you for months that certain industries will recover from this recession quickly.
The so-called experts, however, were calling for an all-out crash! They even said these sectors might never recover.
If you’ve been following my advice, you know better. The latest government numbers were just released, and boy did they prove us right.
It turns out all the experts who had been calling for the worst were dead wrong. In my video, I show you how wrong they were and how to make money off their terrible call.
Because if you want to make money, and I mean the kind that could move the needle in your life … there is only one way: buy great businesses when they are selling at bargain prices. It is nothing more complicated than that.
Click on the video below. And if you’d like to see our videos on YouTube before they’re released to the general public, subscribe to my channel here.
Retail sales were released the other day, and it caught the experts off guard. Shoppers opened up their pocketbooks at malls and auto dealers last month. I want to share with you what that means and what stocks should do really well.
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OK, retail sales blew the covers off the door, and it was exactly the places experts were saying were going to be dinosaurs.
Now, what I’m talking about here is that the experts were saying that consumers, when the economy opens up post-pandemic, were not going to go shopping in malls. They were not going to change their shopping habits for what they were doing during the coronavirus, which is online shopping and e-commerce. The experts said the fat lady was singing regarding the death of retail, especially at malls.
And auto dealers? Forget about it! Experts said that consumers would be too worried about putting food on the table, and there was no way in the world that we could be buying autos.
Well, that’s not exactly what happened.
Retail is the Backbone of the Economy
The Economist projected retail sales would increase by around 8%. Instead, it came in at a whopping 18% from May. Whoops! It’s amazing that they get paid for giving advice like that and making predictions.
So, the question I’m asking today is: Why are retail sales so important?
The answer is simple. It is a ripple effect. That ripple effect really goes throughout the economy. Think about this. Stores buy from wholesalers, which buy from manufacturers at times, which buy raw materials, which need truckers, et cetera, et cetera, et cetera. So, retail sales drive a large part of the economy, and when retail sales are higher, that’s a good sign.
Stocks on the news soared higher from the start of the open. The market opened up 800 points higher. Now, this all bodes well for U.S. recovery from the shutdown of the coronavirus — and if you’ve been a subscriber to my channel, it should come as no surprise.
Two months ago, in April I shared with you two retail stocks that should do really well, and I said: “Even during a recession.”
At the time, things were not all clear. The markets still made a bottom just a few weeks before, and it didn’t look that good. A little more than one month ago — one month ago and a couple of days — in May, I told you about two other retailers that are about to take off. Let’s review what they were.
First is the TJX Companies Inc. (NYSE: TJX). Now, TJX operates the T.J. Maxx, Marshalls and HomeGoods stores. The largest off-price retailer, it’s been adding footage in recent years. It’s really the thrill of the bargain going there, and that’s bringing shoppers through the door. You can’t get that thrill of the hunt on Amazon.
During good times, the stock gets very pricey, and during bad times, it just doesn’t do as well. But here’s what happened. It traded as high as around $65 in early February, and the stock plunged to around $33 at the end of the March. Currently, it’s trading up around 20% since I told you about it last time — but this is just the beginning. I see prices going way higher over the next several years.
The second stock I shared with you was Ross Stores Inc. (Nasdaq: ROST). Now, Ross is one of the larger off-price retailers and home fashion retailers in the U.S. It operates two brands, Ross Dress for Less and dd’s Discounts.
It’s famous for discounted prices. Its store environments drive customers. It buys a wide range of products at lower prices, and what it does there is mark them up — but not as high as brand stores or specialty stores, so you get a great bargain. What’s great about Ross Stores is it keeps operating costs as low as possible.
The stock traded as high as $121 in early February. It was cut almost in half in March. It’s been rallying since, but currently it’s up around 11% since I recommended it to you, and this is still in the early innings.
One month ago, I shared with you an auto retailer. Funny how auto sales are up now.
I shared with you an auto retailer, O’Reilly Automotive Inc. (Nasdaq: ORLY). I told you that, in the post-COVID-19 world, humans are still going to need to drive to get around. I wasn’t thinking that’s going to change much, especially if you don’t live near mass transit if you live in a city. So, people still need cars to get around.
And the thing about cars is you still need to upkeep them — especially older cars. They need maintenance. The average age of vehicles today on the road is 11 years old. I don’t see people going out and getting new cars as opposed to fixing up their old ones or buying used cars, which are doing fantastic.
To my surprise, people are buying new cars. I figured that with 33 million people unemployed, they’ll be concerned with fixing up their cars instead of buying new ones. But they’re doing both now, and that’s why I like auto retailer O’Reilly. Since I shared O’Reilly with you, the stock’s up just a tad, but it should continue to sell higher. It’s in a great trend.
Lastly, I told you about Burlington Stores Inc. (NYSE: BURL), another off-price retailer. I saw this after the financial crisis in ‘08. Off-price retailers like T.J. Maxx, Ross and Burlington did very well. The reason was simple: Why pay retail prices when you could buy clothing at 40% off the price? It just makes no sense to pay full price.
So, from a market low in 2009, this stock has run up over 500%. I see this still happening once again over the next several years. The reason is this company has a high inventory turnover, a competitive advantage in terms of its strong vendor relationships that keep the bargains coming into the store and its customer base — get this — has incomes between $25,000 and $100,000. That’s a pretty big range, so there’s always something for everyone. Since I shared Burlington with you, the stock’s up close to 30%.
The Recovery Will Continue
But it’s just the beginning for all of these. We’re in the early stages of what I think is going to be a great recovery. Now, where the economy is going, I really don’t have much of an idea. I can’t tell you we’re going to be at X percent by Y time. I just don’t know.
But all I can tell you is human behavior won’t change much for everyday things. People are still going to need cars to drive, and they’re still going to need to keep them for longer. They’re still going to dress, and they’re still going to need clothes.
During times of economic uncertainty, even more so, people are going to look for deals. And you can’t get any better than shopping at places that change their selection and give you 40% off brand prices. That’s why I like those three retailers.
My next recommendation, which is going to only be available to subscribers, is a stock that is excellently positioned. This stock is right in the sweet spot to capture an even bigger trend than retail recovery, and that’s health care. This company has huge market share, around 25%. It gets more than half its revenue from two states — Florida and Texas — where the demographics are rising and there’s no state income tax. It’s run by a rock star CEO, and this stock is now selling for a bargain price. Click on the link right up there, and click subscribe. This way you can subscribe to my newsletter.
So, to sum it up: Surprise, surprise, the experts were wrong. The key to making money is not making predictions. The key to making money is taking advantage of uncertainty and finding great businesses that are financially sound and trading at attractive prices. That’s really it.
No. 1, when the economy picks up again, off-brand retailers will take off, as we’re seeing happen right now. This is just the start. Many states are just opening up. And No. 2, people are still going to be driving and fixing up their cars.
So there you have it: four stocks that should do outstandingly well over the next several years. This is not a trend that’s going to be measured in months. It’s a trend that’s going to be measured in years. Keep in mind that past stocks I’ve talked about went up 500% to 600% from the lows of ‘09. It didn’t happen in a month — so if you’re looking for long-term trends to set it and forget it, to sit back and let the profits take care of themselves, these are the four companies I recommend.
Until next time, this is Charles Mizrahi with the Alpha Investor Report. Thanks for watching.
Editor, Alpha Investor Report