The Zacks Analyst Blog Highlights: Family Dollar Stores, Dollar General, Fred's, Dollar Tree, Five Below, Big Lots, SPDR S&P Retail ETF and Market Vectors Retail ETF
CHICAGO, June 17, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Family Dollar Stores Inc. (NYSE:FDO-Free Report), Dollar General Corp. (NYSE:DG-Free Report), Fred's Inc. (Nasdaq:FRED-Free Report), Dollar Tree Inc. (Nasdaq:DLTR-Free Report), Five Below Inc. (Nasdaq:FIVE-Free Report), Big Lots Inc. (NYSE:BIG-Free Report), SPDR S&P Retail ETF (AMEX:XRT-Free Report) and Market Vectors Retail ETF (AMEX:RTH-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
Can Carl Icahn Revitalize Retail ETFs?
If you want to invest like billionaire activist investor Carl Icahn, you need to have full faith on the U.S. retail industry. Last week, Icahn along with his affiliates bought a 9.4% stake in the discount store retailer Family Dollar Stores Inc. (NYSE:FDO-Free Report) for nearly $265.8 million. Following the news, shares of FDO surged 13.4% on June 9, 2014 (read: Is It Finally Time to Buy Retail ETFs?).
Many other value-oriented or discount retailers also joined the party thrown by Family Dollar. Dollar General Corp. (NYSE:DG-Free Report) jumped 7.35%. Fred's Inc. (Nasdaq:FRED-Free Report) was up 1.04%. Dollar Tree Inc. (Nasdaq:DLTR-Free Report) and Five Below Inc. (Nasdaq:FIVE-Free Report) added 0.65% and 0.85%, respectively. Big Lots Inc. (NYSE:BIG-Free Report) – broad line closeout retailer – gained 2.77%.
Retailers had a shaky start this year thanks to one of the coldest winters which locked shoppers inside and weighed on the sales of the company. Tepid consumer recovery and reduced purchasing power have made the retail sector one of the weakest price performers among the 16 Zacks sectors from a year-to-date look (read: Weak Earnings Hurting Retail ETFs?).
Spending at U.S. retailers stalled in April after a rise in the prior month. Sales in April nudged up 0.1% while it grew 1.5% in March. However, retail sales are largely related to consumer confidence. While confidence dipped in April, it improved in May, though slightly. Thus, we expect, in line with the general sentiment, retail sales to see an uptick in the days ahead.
In such a downbeat backdrop, Icahn gave a sweet surprise to retailers at large. Not only Icahn, some other esteemed investors like Nelson Peltz's Trian Fund Management LP and John Paulson's Paulson & Co. have acquired a 7.4% and 5.7% stake in Family Dollar, respectively. In fact, the SEC filing related to Icahn's stake purchase indicates "great long-term potential" in the discount retail industry.
One can't deny gradual recovery in the U.S. economy as confirmed by the multi-year highs in the stock market, a decent labor market and the steady wrap-up of the Fed's QE stimulus (read: Inside the Volatility ETF Crash: Is a Rebound Coming?). It is probably because of customers' cautious spending pattern that the sector is not enjoying the all-out spending bliss.
While mostly discount retailers rallied following the FDO news, we believe the move can act as a cornerstone to the entire industry. Whatever the case may be, retail sales should sooner or later surprise investors who have turned away.
Those who share their views with Carl Icahn might try out the retail or consumer discretionary ETFs mentioned below as a basket approach is far better than a single stock pick in this market uncertainty.
SPDR S&P Retail ETF (AMEX:XRT-Free Report)
This product looks to track the S&P Retail Select Industry Index, holding 104 stocks in its basket. It is widely spread across each component as none of these holds more than 1.47% of total assets.
In-focus FDO has 1.01% share in the fund while BIG has 1.21%, DG has 1.02%, DLTR has 1.03% and FIVE has 0.96%. In fact, XRT has wide exposure to discount-retailers.
In terms of sector holdings, apparel retail takes the top spot at one-fourth share. The fund has amassed about $607 million in its asset base. The ETF charges 35 bps a year in fees.
XRT added 0.29% in the key trading session and 2.62% last week. The ETF has a Zacks ETF Rank of 2 or 'Buy' rating with Medium risk outlook.
Market Vectors Retail ETF (AMEX:RTH-Free Report)
This fund follows the Market Vectors US Listed Retail 25 Index and holds about 26 stocks in its basket with AUM of $28.5 million. Expense ratio comes at 0.35%. The product is heavily concentrated on the top 10 holdings with more than 60% of assets with the largest allocation to Wal-Mart. Discount retailer Dollar General accounts for 3.14% of the fund.
Sector wise, specialty retail occupies the top position with less than one-third share. RTH added about 1.94% last week and has a Zacks ETF Rank of 3 or 'Hold' rating with a Medium risk outlook.
Bottom Line
Thanks to being beaten down this winter, consumer discretionary or retail stocks have some scope for a run-up in the coming days. The tone of retailers is broadly muted, but the sector is still expected to log 8.5% earnings growth in 2014 and 14.3% in the following year. This should encourage investors with a strong appetite for risk to invest in retail ETFs such as the ones described above.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Get the full Report on FDO - FREE
Get the full Report on DG - FREE
Get the full Report on FRED - FREE
Get the full Report on DLTR - FREE
Get the full Report on FIVE - FREE
Get the full Report on BIG - FREE
Get the full Report on XRT - FREE
Get the full Report on RTH - FREE
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO
SOURCE Zacks Investment Research, Inc.
Share this article