Happy Thanksgiving! I hope you’ve been enjoying the festivities surrounded by family and friends (and that you’re over your food coma). You may have even taken part in a little holiday shopping yesterday, the day of all days for retail stores: Black Friday.
Last Saturday, I discussed five growth stocks that could benefit from holiday shopping. Today, I’ve got five value stocks that have been featured in Cabot Benjamin Graham Value Letter and could see a boost when consumers open their wallets.
Without further ado ...
Bed Bath & Beyond (BBBY):
Bed Bath & Beyond is benefiting from both sides of the recession: with people hunkering down at home more, they’re spending money to improve their nests ... and as people re-enter the workforce after long bouts of unemployment, they’re spending some of their newfound incomes on home improvement. The company sells an assortment of everyday low-priced domestic goods and home furnishings, as well as other items, through its Bed Bath & Beyond, Christmas Tree Shops and buybuy BABY stores. The company operates 1,142 stores in all 50 states plus Puerto Rico and Canada. Although its locations are spread out over a wide geography, Bed Bath & Beyond aims to supply its stores with goods that fit regional climate and demographics, a strategy that has proved profitable. The company has a strong balance sheet, which should support future expansion.
GameStop (GME):
GameStop is the top retailer of software, hardware and game accessories for video game systems made by Sony, Nintendo and Microsoft. Even more important during these rough economic times is the fact that GameStop is the largest reseller of user video games and PC entertainment software. GameStop has 6,670 locations in 17 countries and sells products through its website. The company is focused on developing its distribution of downloadable content, which surged a huge 60% in 2010 and is expected to rise 50% a year for the next four years. Downloadable content is the way of the future, so this focus should serve the company well for years to come.
Kohl’s (KSS): The same trends that are driving the dollar store segment higher are working in Kohl’s favor as well. The company operates specialty department stores that feature national, private and exclusive brand merchandise priced to provide a good value to customers. The company’s private and exclusive brand goods make up 48% of sales and shield it from the competition. Kohl’s has just over 1,000 outposts primarily in the Midwest, Mid-Atlantic and Northeast areas of the U.S. selling quality apparel, shoes, accessories and home goods to middle-income consumers seeking value and convenience. Kohl’s, which initiated a dividend earlier this year, has seen website sales grow in recent months.
Nike (NKE): I’ve written a lot about Under Armour (UA) and I still believe the company has a lot of growth ahead. However, long before Under Armour even existed, Nike was paving the way for the industry both companies would later inhabit. Despite Under Armour’s success in the sports apparel industry, Nike is still the big dog in town. The company is the top seller of footwear, apparel and accessories for athletic and recreational activities. Nike sells its products to 23,000 retail accounts in the U.S. and in about 170 other countries, giving it broad global exposure. New golf products and women’s footwear are just two areas that have provided growth for the company in recent years, giving Nike a strong balance sheet with which it can continue to expand. Exposure to the fast-growing emerging markets and the 2012 Olympics should provide growth.
Ross Stores (ROST): Ross sports a story similar to Kohl’s and is benefiting from the same trend towards value and convenience. The company operates over 1,000 stores in 27 states and Guam that sell apparel, shoes, jewelry and home furnishings. Ross offers brand-name merchandise at 20% to 60% below regular department and specialty store prices by scooping up manufacturers’ cancelations and overruns. The company’s strategy is to keep low in-store inventories to boost turnover and reduce the need for further discounts. Ross has plans to expand into new areas and the lagging economy should send more consumers its way. And just last week, Ross reported its 11th straight quarter of profit growth, indicating that discount-seeking shoppers are still flocking to the retailer.
To get full write-ups, including specific buy and sell prices, on the stocks mentioned above and other high-quality value stocks, check out Roy Ward’s latest recommendations in Cabot Benjamin Graham Value Letter.
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Here’s this week’s Contrary Opinion Button. Remember, you can always view all of the buttons by clicking here.
Wisdom Begins With Wonder
It’s attributed to Socrates, and as a proponent of never-ending education, I like this one a lot. Of course, wonder is only the first step. After wonder come research, analysis, synthesis, experience and then (sometimes), wisdom.
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I have something different for you in the video department today ... a special clip from Dick Davis Digests Editor Chloe Lutts. In the latest edition of What Wall Street Experts Are Saying This Week, Chloe reviews the reaction to Monday’s market collapse, and how it affected advisors’ short- and intermediate-term outlooks. Stocks discussed: HealthStream (HSTM), Standard Motor Products (SMP) and American Campus Communities (ACC).
Until next time,
Elyse Andrews
Editor of Cabot Wealth Advisory