One of the most beat-up sectors of the economy since the start of the pandemic has been retail. With more consumer spending moving online, there has been a mass consolidation among major retail chains.
Which brings us to our first non-tech stock….
TJ Maxx (TJX)
TJ Maxx has been a victim of that. The stock peaked near $64 in mid-February. From there, it tumbled 43% to a bottom below $37. Today, it's hovering right under $50.
Is it a buy? According to Michael Kagan, a portfolio manager at ClearBridge Investments, it is. Via MarketWatch:
It is the largest off-price retailer and “is the only one of the top 10 retailers that has been adding footage in recent years,” according to Kagan. “It’s one of those companies that gets expensive when everyone is enthusiastic about it. Every so often the market gives you and opportunity to buy it, and this is one of them.”
With a balance sheet that indicates it could operate for 14 months without selling anything at all (according to Kagan), the temporary shutdown of most of its stores won't force the company under.
And once the economy does re-open, its status as a bargain store makes it recession-proof buy.
Lowe's (LOW)
Home Depot missed earnings this week, reportedly due to the $850 million they spent on benefits for employees to keep its stores and warehouses safe and running.
However, revenue rose 7.1% over a year ago, which bodes well for the company moving forward. If you've been anywhere near a home improvement store since the pandemic started, this won't surprise you. All of this means good things for Home Depot's biggest home improvement rival.
Lowe's was dragged down to $60 in mid-March, but the stock has roared since then. Analysts expect Lowe's to report revenue of $18.33 billion, which would be a rise of 3.3% from the first quarter of 2019. That estimate hinges on same store sales growth. Via Market Realist:
The positive SSSG could drive the company’s sales. Meanwhile, a decline in the total number of stores due to closing 34 underperforming stores could offset some of the sales growth.
Lowe's is scheduled to release earnings before the market opens on Wednesday. If, like Home Depot, the company fails to hit its earnings projection, the stock could pull back a little bit, which may give long-term investors a buying opportunity.
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McDonald's (MCD)
McDonald's missed expectations for earnings per share, but beat the consensus revenue target. However, sales were still down 6% from 2019.
To make maters worse, same-store sales growth dropped 3.4% in the first quarter. Surprisingly, the drive-thru hasn't been busy enough to make up for the in-store shortfall.
As restaurants and businesses begin to re-open in different stages and at different speeds throughout the country, McDonald's stands to benefit. And the recession is unlikely to claim them as a victim once that happens. McDonald's has historically been a recession-proof stock. Via InvestorPlace:
If you drive around town, you’ll probably notice as I have that the McDonald’s drive-thru line has been getting longer. I don’t think that’s a coincidence. As people venture out of quarantine, they want some semblance of their past paradigm. Fast-food burger joints help resolve that nostalgia, which will steadily lift demand for MCD stock.
Therefore, I would take any fear-based dips in MCD as buying opportunities. Not only is this company strong, but its brand appeal shines bright whether in a bull or bear market.
