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  • Retail Stocks: Showing Some Improvement

    Posted on August 16th, 2011 Profit Confidential No comments

    By George Leong, B.Comm.

    We're seeing some improvement in the area of retail and retail stocks. George gives you his investment advice on the types of stocks you may want to look into.

    I must admit the fact that consumers continue to spend despite any strong or sustained job growth and continued weakness in housing is encouraging. With consumer spending accounting for two-thirds of GDP, retail sales will eventually be stronger when the jobs and housing areas improve, albeit it will likely take over a year.

    The headline Retail Sales reading for July increased 0.52%, in line with the consensus estimate, but above the upwardly revised 0.3% in June. It was the biggest increase since March and clearly offers some optimism that the economy may avoid another recession.

    Excluding the auto portion, Retail Sales increased a slightly better than expected 0.5% versus the consensus estimate of 0.2% and above the upward revised 0.2% in June.

    While we still need to see a sustained upward trend, the reading was encouraging. And with oil below $90.00 a barrel, gasoline prices have declined, which will add some disposable income for consumers to spend on goods and services. Of course, consumers are fickle and will continue to search for the best bargains out there.

    At this juncture, I’m selective with retail stocks. My investment advice, my best stock advice, to you would be to stick with the leading discount bellwether retail stocks.

    In the large-cap area, these stocks include Wal-Mart Stores, Inc. (NYSE/WMT), Target Corporation (NYSE/TGT), and Costco Wholesale Corporation (NASDAQ/COST).

    Costco reported a 10% jump in its key same-store sales reading in July following a 14% surge in June. Net sales for July surged 15% year-over-year. The results are consistent and continue to show steady growth; but, for that extra bit of growth, you should look at the smaller discount retail companies.

    Costco, for instance, has a market cap of $31.79 billion and is estimated to report sales growth of 13% and eight percent for the FY11 and FY12, respectively.

    For comparison, take a look at small-cap PriceSmart, Inc. (NASDAQ/PSMT), an operator of 28 warehouse clubs in 11 countries in Central America and the Caribbean. PriceSmart reported a booming 20.9% increase in its same-store sales in July, along with a 23.8% year-over-year rise in July net sales. The reading was the 21st straight monthly increase. These are well above the growth metrics for Costco. Consider the comparative sales growth for PriceSmart, which is 22.3% and 14.2% for the FY11 and FY12, respectively. The growth estimates are probably conservative and could really take off if the expansion continues.

    Another interesting discounter is large-cap Dollar General Corporation (NYSE/DG), which operates a staggering 9,300 stores across 35 states. Dollar General has reasonable valuation, trading at 12.26X FY13 earnings per share and a price/earnings growth ratio of 0.80. The stock has above-average price appreciation potential for investors.

    When the housing and jobs areas pick up, I expect spending to increase quicker, especially on the non-essential Durable Goods.

    My favorite in the retail space continues to be the discounters and big-box stores. The big-box stores are now selling a broad range of electronics and are adding to their product line. This will offer consumers a one-stop place for shopping and make more money for these companies.

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  • My Best Stock Advice on the Retail Sector

    Posted on July 29th, 2011 Profit Confidential No comments

    By George Leong, B.Comm.

    The upward move of the retail sector is impressive given the constraints. George senses that retailers are just more efficient as far as production and inventory control and have not been caught with excess inventory as was the case in the past. This is not to say that the retail sector is the place to make money, but there are some winners and market leaders.

    Consumer spending drives the economy and gross domestic product (GDP) growth, accounting for about 70% of GDP in the U.S.

    The retail sector has been rebounding in spite of the lack of jobs and the declining home prices. The S&P Retail Index (RLX) is trading near its 52-week high, up 37% from the 52-week low. The RLX recently traded at its highest level since the index was created in 2007.

    The upward move of the retail sector is impressive given the constraints. I sense that retailers are just more efficient as far as production and inventory control and have not been caught with excess inventory as was the case in the past. This is not to say that the retail sector is the place to make money, but there are some winners and market leaders.

    The headline Retail Sales reading for June increased 0.1%, slightly above the estimate calling for a decline of 0.2% and up from an upwardly revised negative 0.1% in April. Excluding the auto portion, Retail Sales were flat and in line with estimates.

    On the plus side, consumers are spending, but the lack of consistency is troublesome. And, given that gasoline prices are high, this reduces the disposable income that consumers have to spend on goods and services. You may not buy that DVD player you had been eyeing. This may not sound like a big deal, but think about it this way. Not buying that DVD player has a trickle-down effect as far as spending and negatively impacts total spending.

    But this is not to say that you must avoid retail. The key for success is selective picking.

    My investment advice and best stock advice to you would be to stick with the leading discount bellwether retail stocks.

    In the large-cap area, these include Wal-Mart Stores, Inc. (NYSE/WMT), Target Corporation (NYSE/TGT), and Costco Wholesale Corporation (NASDAQ/COST).

    Costco reported a 14% jump in its key same-store sales reading in June, well above estimates. Net sales for June surged 18% year-over-year. The results are consistent and continue to show steady growth, but, for that extra margin of growth, you should look at the smaller discount retail companies.

    Costco, for instance, has a market cap of $34.55 billion and is estimated to report sales growth of 12.8% and 8.1% for the FY11 and FY12, respectively.

    For comparison, take a look at small-cap PriceSmart, Inc. (NASDAQ/PSMT; market cap; $1.73 billion), an operator of 28 warehouse clubs in 11 countries in Central America and the Caribbean. PriceSmart reported a booming 19.7% increase in its same-store sales in June, along with a 21.1% year-over-year rise in June net sales. These are well above the growth metrics for Costco. Consider the comparative sales growth for PriceSmart, which are 22.3% and 14.2%, for the FY11 and FY12, respectively. The growth estimates are probably conservative and could really take off if the expansion continues.

    Another interesting discounter is large-cap Dollar General Corporation (NYSE/DG), which operates a staggering 9,300 stores across 35 states. Dollar has reasonable valuation and above-average price appreciation potential for investors.

    And when housing picks up, I expect spending to continue to increase, especially on non-essential goods and services reflected by Durable Goods.

    It does appear that a reversal is occurring in retailing. The key is to look for same-store sales growth in retailers that sell non-essential goods. Increases here could mean consumers are spending on goods and services that are non-essential. These include electronics, appliances, furniture, autos, and other big-ticket items.

    My favorites in the retail space continue to be the discounters and big-box stores. The big-box stores are now selling a broad range of electronics and are adding to their product line. This will offer consumers a one-stop place for shopping and make more money for these companies.

    Retire on This One Hot Stock!

    This stock is up 232% since we first picked it. Our expert analysts say it will go up another 100% in the next 12 months! Our top 19 stock picks were up an average of 173.57% in 2010 (not a misprint). See where we are making money in 2011 and get our combined 100 years of investing experience working for you starting today.

    Get your FREE report on our top stock pick immediately here.

    http://www.profitconfidential.com/pcabs/

    Visit our site:

    http://www.profitconfidential.com/

    Share
  • Retail Stocks: Faring Well Despite Jobs and Housing

    Posted on June 30th, 2011 Profit Confidential No comments

    By George Leong, B.Comm.

    So far, even without strong job growth and with continued weakness in housing, consumers continue to spend, which is helping to drive the economic renewal, albeit sluggishly. This is positive and clearly encouraging once the jobs and housing areas improve. George gives you some examples of the types of retail stocks you may want to consider for your investment portfolio.So far, even without strong job growth and with continued weakness in housing, consumers continue to spend, which is helping to drive the economic renewal, albeit sluggishly. This is positive and clearly encouraging once the jobs and housing areas improve. The Fed realizes this.

    The headline Retail Sales reading for May fell 0.2%, above the estimate of negative 0.7%, but was lower than the downward revised 0.3% in April.

    Excluding the auto portion, Retail Sales increased a slightly better than expected 0.3%, albeit it was lower than the downward revised 0.5% in May.

    On the plus side, consumers are spending, but the lack of consistency is troublesome. And given that gasoline prices are high, it reduces the disposable income consumers have to spend on goods and services. You probably won’t buy that DVD player you had been eyeing. This may not sound like a big deal, but think about it this way. Not buying that DVD player has a trickle-down effect as far as spending and negatively impacts total spending.

    But this is not to say you should avoid retail. The key for success is selective picking.

    My investment advice and best stock advice to you would be to stick with the leading discount bellwether retail stocks.

    In the large-cap area, examples of these include Wal-Mart Stores, Inc. (NYSE/WMT), Target Corporation (NYSE/TGT), and Costco Wholesale Corporation (NASDAQ/COST).

    Costco reported a 13% jump in its key same-store sales reading in May, above the 11.2% estimate polled by Thomson Reuters. Net sales for May surged 17% year-over-year. The results are consistent and continue to show steady growth; but, for that extra bit of growth, you should look at the smaller discount retail companies.

    Costco, for instance, has a market cap of $35.02 billion and is estimated to report sales growth of 12.5% and 7.9% for the FY11 and FY12, respectively.

    For comparison, take a look at small-cap PriceSmart, Inc. (NASDAQ/PSMT), an operator of 28 warehouse clubs in 11 countries in Central America and the Caribbean. PriceSmart reported a booming 19.0% increase in its same-store sales in May, along with an 18.7% year-over-year rise in May net sales. The reading was the 19th straight monthly increase. These numbers are well above the growth metrics for Costco. Consider the comparative sales growth for PriceSmart, which is 16.80% and 7.90%, for the FY11 and FY12, respectively. The growth estimates are probably conservative and could really take off if the expansion continues.

    Another interesting discounter is large-cap Dollar General Corporation (NYSE/DG), which operates a staggering 9,300 stores across 35 states. Dollar has reasonable valuation and above-average price appreciation potential for investors.

    And when housing picks up, I expect spending to continue to increase, especially on non-essential goods and services reflected by Durable Goods.

    It does appear that a reversal is occurring in retailing. The key is to look for same-store sales growth in retailers that sell non-essential goods. Increases here could mean that consumers are spending on goods and services that are non-essential. These include electronics, appliances, furniture, autos, and other big-ticket items. For a contrarian pick in electronics, take a look at Best Buy Co., Inc. (NYSE/BBY), which has rallied since reporting weak Q1 results.

    My favorite in the retail space continues to be the discounters and big-box stores. The big-box stores are now selling a broad range of electronics and are adding to their product lines. This will offer consumers a one-stop place for shopping and make more money for these companies.

    Retire on This One Hot Stock!

    This stock is up 232% since we first picked it. Our expert analysts say it will go up another 100% in the next 12 months! Our top 19 stock picks were up an average of 173.57% in 2010 (not a misprint). See where we are making money in 2011 and get our combined 100 years of investing experience working for you starting today.

    Get your FREE report on our top stock pick immediately here.

    http://www.profitconfidential.com/pcabs/

    Visit our site:

    http://www.profitconfidential.com/

    Share
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