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Retail Bargain Hunting By James Blakeway
hen America was asked to stay home in 2020, Amazon (AMZN) was there to keep consumers stocked up, in shape and entertained with everything from face masks and toilet paper to dumbbells and exercise bikes. After the brief pullback in February and March of 2020, which left virtually no stocks unscathed, Amazon shares roared back to new highs. The stock hit its all-time peak close, topping $3,530, in August. Despite recent ebbs and flows, Amazon stands tall as the third-largest component in the S&P 500, a $1.6 trillion behemoth overshadowed by only Apple (AAPL) and Microsoft (MSFT). While Jeff Bezos’ wealth has become notorious, he’s not the only one to benefit from Amazon’s meteoric rise. A $10,000 investment in Amazon in January 2000 would be worth more than half a million dollars today. While leadership, strategic moves and an unsatiated hunger for more led Bezos’ firm to its current standing, it wouldn’t have been possible without one key component: the American consumer. Americans earn some of the highest discretionary incomes in the world
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and also support their lavish spending habits with piles of credit card debt. While Amazon captured enough of that spending to appear almost untouchable as the world’s largest retailer, it’s not without competitors that have their own advantages. Walmart (WMT), a familiar part of the scenery across the nation, has invested considerable amounts of money to compete with Amazon online. Walmart even launched Walmart+, a service to rival Amazon Prime with customer perks that include gas discounts. Target (TGT) bolstered its online presence recently, often matching Amazon’s overnight or two-day shipping options. Both Walmart and Target grew in 2020 and 2021, hitting all-time highs in November and April, respectively. With 40% and 23% returns last year, Target and Walmart both beat the S&P 500’s 18% 2020 return despite being overshadowed by Amazon’s eye-watering 76% return. While it may be tough for investors to justify purchasing any of these retail giants near record highs, the case may be stronger for Walmart or Target because they could see more
foot traffic as COVID-19 restrictions continue to lift across the country. Walmart and Target both pay dividends yielding over 1.3% annually, but Amazon still does not pay a dividend. The other guys These three retail giants aren’t the only merchants competing for a share of America’s wallet. Besides the never-ending list of smaller retailers, some other large-cap stocks stand out for investors seeking retail portfolio exposure. Costco (COST) saw impressive growth not only in the last year but over the last decade. However, Costco is also near record highs despite a pullback in the first quarter of this year. Investors may wish to look for a subsequent pullback in the stock price before considering adding it to their portfolios. While many Americans write off eBay (EBAY) as an early 2000s internet fad, investors saw impressive gains in 2020 with a 40% return on the year. eBay shares experienced a steady decline from 2005 to 2011, but the last decade saw consistent growth in revenues because the site remains a top market-
Stay offshore Stock prices for U.S. retailers can seem prohibitively high, but China’s Alibaba has room to increase in value. Data as of April 20, 2021. Company
Amazon.com, Inc.
Target Corp.
Walmart, Inc.
Costco Wholesale Corp.
eBay, Inc.
Alibaba Group
Symbol
AMZN
TGT
WMT
COST
EBAY
BABA
Dividend yield
N/A
1.31%
1.56%
0.85%
1.13%
N/A
Market cap (billions)
$1,659
$103
$397
$165
$42
$636
2020 return
76%
40%
23%
33%
41%
10%
YTD return
2%
18%
-2%
-1%
23%
-1%
All-time high (close)
$3,531.45
$208.65
$151.60
$386.80
$64.93
$317.14
Past performance is no guarantee of future results. Information provided in an EPI Report does not consider the specific profile, objectives or circumstances of any particular investor or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her investment professional. Investment suitability must be independently determined for each individual investor. QF does not make suitability determinations or investment recommendations for investors. EPI utilizes the S&P 500 as its benchmark given that the S&P 500 is considered a barometer of stock performance in the United States. Aspects of the analysis and information found in an EPI Report are based upon simulated and/or hypothetical performance. Simulated and hypothetical performance have inherent limitations and do not represent the actual performance results of any particular investment products. The EPI Report does not guarantee any results or outcomes in the financial markets. Investors should be aware of the methodology used to produce an EPI Report and the inherent limitations when placing reliance on the results. For additional information about EPI Reports, visit the QF website: quietfoundation.com.
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