The Retail Resurgence Is A Rare Opportunity

One place I’m putting my money to take advantage of this downturn?

Retailers.

Rare Retail Opportunity

The sell-off of recent weeks knocked down the stock prices of many. It turned this already undervalued group of companies into a heavily undervalued group.

Yet the news keeps getting better for retailers.

  • We have a S. economy that’s still charging higher.
  • Wages are rising. The Labor Department said average hourly earnings rose nearly 3% in January from year-ago levels.

Because of corporate tax reform, many of the larger employers in the U.S. economy are handing out worker bonuses.

And what do most people do when handed a bonus? They spend it.

Retail Strikes Back

On top of the sell-off, we have the overblown “retail armageddon” story, which continues to depress many of the stocks in the group.

My view is that the weakest retailers, like Sears, and other marginal store brands were already on their way out. All they needed was for Amazon (and their own competitors) to shove them out the door.

The fact is that plenty of retailers have already figured out how to “do” online sales.

Walmart Inc. (NYSE: WMT) showed the way. Its online sales rose 50% in the third quarter last year. It reports fourth-quarter and annual figures on February 20.

At Home Depot Inc. (NYSE: HD), online sales now make up more than 6% of its total revenues, and it’s rising. The company’s grown its digital channel by roughly $1 billion a year since 2014. The home improvement retailer also reports its latest earnings on February 20.

And those are just two of the “biggies” in the sector.

How to Play This Rare Retail Opportunity

Most retail exchange-traded funds (ETFs) have been beaten down about as much as the overall stock market so far, losing 10% to 15% of their value. Given the trends above, that makes right now a great time to buy.

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