It was a jolly holiday season for retailers… and we know why.
Americans are feeling better about the economy than they have in years…
And that has led to many big retail stocks marking new recent highs.
Can investors still get in on the rally… or is it too late?
In this week’s Buy This, Not That, I look at some of the biggest retail stocks on the market.
You’ll see which ones are BUYS right now… and which ones are NOT.
And I recommend a specific exit strategy that accounts for the rally these stocks have seen.
You won’t want to miss it.
It’s all in my latest video.
Click on the image below to check it out.
Note: While the retail sector is hitting new highs… I think tech is going to do even better. And that’s thanks largely to AI. If you thought last year was big for AI… you ain’t seen nothin’ yet.
To help my readers prepare – and prosper – I’ve put together a brief presentation that details where I’m seeing the biggest opportunities now. Grab some paper and a pen, and then check it out here.
Transcript
Hey, everybody. Shah Gilani with your weekly BTNT, as in Buy This, Not That. This week, I’m going to hit the big retailers – not all of them, but a good chunk of them. Why? Because a lot of the stocks have been doing well. Not all of them, mind you, and there’s a rather unique opportunity here because most of them look pretty good.
And the caveat to most of them looking good – as in maybe you can buy them – is maybe you should. Because most of them, you can apply about a 10% stop on them, which gives you an opportunity to trade them higher with only 10% risk. I like that. I like a lot of these retail names because they have made new highs, and stocks that make new highs can continue to go higher.
Let’s take it from the top. First up is the big boy, Amazon, AMZN. I’m going to give you fresh numbers. It’s just nearing on 1 p.m. ET Wednesday. And Amazon, people… well, you’ve got to love Amazon because it’s Amazon. There’s nothing like it. It is the bomb, in my opinion.
It’s part of the leadership group that’s taken the benchmarks higher again in 2024 to new highs, and it certainly helped lead 2023 all the way to the top, making 2023 a fabulous year. Amazon is hitting it out of the park again. Another new high, people – $157 and change.
You’ve got to love it. You’ve got to love Amazon. What do you got to love about Amazon? $1.6 trillion market cap. The profit margin doesn’t look good. But believe me, a 3.61% profit margin on $554 billion in revenue is a lot of profit. Net income available to common shareholders: $20-plus billion. Yeah. BUY Amazon.
If you’re a nervous Nellie, you can buy it here and get out around $140. There’s support before you get to $140. If you get to $140, get out. If you own it, maybe you want to put a stop in at that $140 level in case the market turns around or you’re a nervous Nellie. But believe me, it’s worth a shot here if you don’t own it.
Next up, Walmart. Now, talking about big boys, it’s the biggest of the big. Because Walmart’s revenue… $640 billion in the trailing 12 months. Profit margin… less than Amazon, 2.55%. But the old WMT stock is trading at a very nice $162 and change.
Now, Walmart had a recent high back on November 15. It’s kind of gotten a little beaten up, and it’s working its way back up. Again, Walmart here at $162, people.
If you don’t own it and you’re wondering whether you can or should, the answer is yes. You should buy it. Why? Because you can put a 10% stop on it… takes that down to $145. If you get down to $145, you probably want to get out anyway, because something’s not working.
But this is a great opportunity for some of these big retail names to get in with a very tight stop. And listen, if they continue to do well, you’re going to do well maybe for months, quarters, years. It’s well worth it when you can have a very tight 10% or less stop on a position in great names. Walmart, it’s a BUY here, with a 10% stop.
If you own these already, you’re happy. Costco, COST. Now, Costco has had another great run higher. So Costco is looking really good… another new high just made in Costco. Beautiful graph all the way up. Listen, this stock has spent its time in the doldrums. It’s now looking really good. And guess what? I think it can continue to go. I’m looking at it longer term. Long term, it looks really solid. But if you look at it over, say, two years, it was pretty flat. Then, all of a sudden, boom – it’s taken off.
Now, again, it just made a new high. Costco, $687. It’s expensive, but you have fractional shares, so you can put in a certain amount of capital. I think you want to buy it here.
Again, you can take a run at Costco here and put a 10% stop on it. Again, there’s nothing wrong with doing that. That’ll take you down around $640. Again, $640, people… you’ve got support above that. If you get down to $640, then something’s wrong. You maybe want to get out.
But it’s a great way to play a great company. Yeah. Costco. Great balance sheet, by the way. Super revenue. Just net is… Everything about Costco, you’ve got to love.
Next up, Target. Target used to be a big favorite of mine. I used to love Target. I don’t own it but did for a long time. Great dividend, all that good stuff. But it had its run-up, and I got out and didn’t ride it down, thankfully. It’s been sloppy at best… and in particular, scary.
Is it a buy here at $141? TGT at $141? I don’t think so. It’s the only one that I just… I’m not sure. Could you buy it at $141 and put a 10% stop on it? Yeah. You could. Let’s see… $141… I’m trying to see where it takes you to as far as support. It takes you to… we’ll call it $127. Well, you know what? That’s support.
I don’t want to do that, because if you get down to that support, the next level down is $114. So it goes from $127 to $114. There’s a huge gap there because the stop gapped up on better-than-expected earnings. But now, if it comes back down to fill that gap, you’re looking at maybe $114.
This one, I’m not sure I’m going to take the chance, even though the 50-day just crossed above the 200-day moving average. That’s bullish, but this one is a bit more of a speculative bet to buy it here and put a 10% stop on it. It’s up to you.
I would wait. Would I buy it at $114 if it gets back down and fills that gap? Oh, yeah. Why? Because it pays a 3.12% dividend yield – not great, but not bad. $114 would look a lot better.
Next up, TJX. Now, as far as TJX goes… The stock is another stock… TJX is the symbol for TJX Companies. Most of you know it. It’s done really well. It’s kind of been boring, but it’s been going on steadily. I’m looking at a one-year chart, and it’s steady Eddie. Looking at the two-year chart… it’s consolidated last year, the first part of the year, then started moving higher.
And now, it’s not one of those barnburners, but it’s a BUY here. Why is it a BUY? Well, it just made another new high – guess what – just a few days back. You’ve got to love it.
And it’s trading at $95.50 right now. You could buy this… a 10% stop would take you to $85. You’ve got support there. You’ve got support above that. You’ve got support at $87 – really good support. You’ve got support at $91 and $87. Before you get to $85, a 10% drop, you’ve got support.
Yeah. I would buy this and have a 10% stop. If it gets down below there, who knows? Something else is going on. Maybe the weight of the market’s knocking it down. But for 10% potential risk? Yeah. BUY TJX.
Next up, Ross Stores, ROST. ROST is trading right now at… It’s up a tiny bit on the day trading. We’ll round it to $139. Trading at $139. Same story. Stock’s had a nice move, plus just made a new high, people. You’ve got to love that.
Ross… $19 billion in revenue, 8.75% profit margin. I like Ross. Ross Stores looks really good to me. Net income available to common shareholders: $1.71 billion. I like it.
A 10% stop would take you down to $125. Plenty of support at $133. Stock’s at $139 now. Support at $127. So $125… you probably would get out and be like, “Yeah. I don’t know what happened.” But it’s only 10%. Well worth it on Ross Stores.
Last but not least, I’m going to take you to Macy’s. Why Macy’s? Because Macy’s is maybe on the block. Macy’s got an offer at about $5.79 billion. Now, the market cap is $4.9 million, so there’s not much of a premium. And Macy’s took a month to apply to these two investment companies that said, “Yeah. We’d like to buy you, and here are some of the terms.”
But they didn’t like the terms. They also said that the value wasn’t there… because the investment companies that want to buy Macy’s presumably like the real estate value, and they think that that is the bulk of the value. Macy’s thinks it’s got plenty of other value that these companies aren’t willing to pay for.
The interesting thing is, Macy’s took a month to get back to them and say, “No. We don’t have any interest in selling ourselves to you.” A month? You do the numbers pretty quickly, people. You can say no pretty quickly.
I think they took a month because they want to leave, shall we say, the door open for maybe a higher offer from someone else, maybe attract some other suitors. But they didn’t see anything. They didn’t get any other suitors knocking on the door, so they rejected it. And the investment companies haven’t come back with anything, any counter.
Part of the problem there is the companies were going to raise debt in order to effect the buyout, and some of that debt had PIK, toggle stuff, payment in kind, where if we don’t make a payment in cash on the debt that we owe you, we’ll give you shares. We’ll give you payment in kind.
And I think that the Macy’s folks looked at that and said, “What kind of debt financing is that? They’re offering payment in kind. I don’t think they could even raise that kind of debt.” It’s another reason that they rejected the offer.
Is Macy’s in play? I think it is. Is it a buy here at $18 and change? I don’t know, because I don’t know what the premium is. I would say no. I just… I think there’s other places to put your capital where you’d be better served.
That being said… Yes, I know I just said I think they’re in play. But I don’t know at what kind of premium. At $18, what are they going to go for, $23? $24? And if it doesn’t happen, Macy’s could sink right back down. Unfortunately, sorry, Macy’s. Eh. NOT.
That’s it for this week. Catch you guys next week. Cheers.
— Shah Gilani
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Source: Total Wealth