There are several stocks in this week’s issue of ValueLine that are worth a look. This issue covers different areas of retail. I’ve always liked retail because there are a lot of companies that see earnings grow year-after-year. This is because companies are able to keep opening stores in new areas and bring in new customers. Some chains open stores too fast, however, and then see a contraction. This happened to Pacific Sunwear about eight years ago and they have yet to recover.
One stock of interest is Wal-Mart. Obviously this company doesn’t have that far to grow – they have already taken over the world – but they are still seeing earnings grow in the 8-10% range and they pay a respectable 2.4% dividend. This might be a good stock for a more conservative account that is looking for current income and some appreciation.
In the shoe industry, you could practically lie a ruler on the share price graph for Nike Inc. and Wolverine World Wide. Both stocks have been growing steadily for the last decade with only a minor decline in 2008. Wolverine is not as strong a company as Nike, but it is also seeing earnings growing faster. Since share price tends to follow earnings, Wolverine would be the better pick of the two but either looks like a nice, steady growth stock.
In the hard-line retailers, Bed Bath and Beyond has had a great ride since about 2009. I owned the stock a few years ago, but sold after I found the service dismal at the store in our area. Obviously other stores are doing better because the stock has been doing well, with earnings growing in the 10% range.They also have an impressive 25% return on equity.
I recently bought some shares of Ulta Salon. This is an unusual move for me, since I generally like stocks with a much longer history, but they are seeing 25% earnings growth and an impressive 20% return on equity. The also have no debt, which says they are well-managed and have plenty of cash flow.
In the clothing retailers, I’ve held shares of Chicos FAS for a while and they have done well. Earnings are expected to increase by about 20% and their return on equity is around 15%. They also have no debt, which is a bonus (start to see a pattern here?).
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.