PRLog - May 13, 2011 - Everyone knows that consumer spending drives the economy and gross domestic product (GDP) growth. The headline Retail Sales reading for April jumped 0.5%, which was slightly below the estimate of 0.6% and down from an upwardly revised 0.9% in March. Excluding the auto portion, Retail Sales increased a slightly better than expected 0.6%, although this is lower than the upwardly revised 1.2% in March.
Discount Retailer Stocks: Why They’re Tops
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 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 goes and negatively impacts total spending.
But this is not to say that you should avoid retail stocks. A key part of investment advice that leads to success is selective picking.
My 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 12% jump in its key same-store sales reading, well above the 8.9% estimate polled by Thomson Reuters. Net sales for April 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 $35.73 billion and is estimated to report sales growth of 11.4% and 7.9% for the FY11 and FY12, respectively.
For comparison, take a look at small-cap PriceSmart, Inc. (NASDAQ/PSMT)
Another interesting discounter is large-cap Dollar General Corporation (NYSE/DG), which operated a staggering 9,300 stores across 35 states. Dollar General 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, and 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 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.
# # #
We publish Profit Confidential daily for our customers because we believe many of those reporting today’s financial news simply don’t know what they are telling you! Reporters are trained to tell you the news—not what it can mean for you!
Visit our site