In this article, we will be looking at the 15 best retail stocks for 2021. To skip our detailed analysis of the retail industry, its current trends, and future outlook, you can click to see the 5 Best Retail Stocks for 2021.
Retail encompasses a vast industry with a huge global market size and millions of people involved in it. To put it simply, though, retail is the sale of anything to anyone for use or consumption instead of resale. According to that definition, your typical grocery store, online clothing website, shopping mall, and other similar business are all involved in the retail trade. As such, it’s not surprising that the industry is so massive, with a global market size of $20.29 trillion in 2020. According to a global retail market report by Research and Markets, this value is expected to rise at a CAGR of 7% to $29.36 trillion by 2025.
Despite the large size of the market itself, even the retail industry was not spared by the coronavirus pandemic. The outbreak of COVID-19 infamously restrained and disrupted supply chains, particularly because of travel bans imposed across the world. Lockdowns and closures of businesses and restaurants only added to the crisis for retailers. For instance, according to the US Census Bureau, clothing retailers’ sales dropped by 89.3% year over year in April of 2020. In Europe, similar trends were seen in the retail of non-food products, which decreased by 23.8% in the same month, according to Eurostat.
However, several areas of the industry actually thrived during the pandemic, thanks to digital sales and the essential nature of the industry. For instance, although restaurants and typical shopping mall sales dropped, grocery shopping made grocery sales rise by 13.2% in the US in April 2020, while food and beverage and even tobacco sales increased by 1.2% in Europe during the same month. A report by Moody’s mentioned that the retail sector will see sales growth in 2021, and department stores will be increasing operating profits by about 200%. Overall, retail operating income is expected to grow by about 10-12% in 2021.
More than anything else, the emergence of e-commerce as the perfect adaptor to the pandemic made online retail much more profitable than it was before. Forbes has reported that global e-commerce sales are due to reach the $4.2 trillion mark this year due to growing reliance on online shopping during the pandemic. Unsurprisingly, then, the retail industry is considered to be one of the biggest, most profitable, and versatile industries in the world, and top players like Amazon.com, Inc. (NASDAQ: AMZN), Shopify Inc. (NYSE: SHOP), Walmart Inc (NYSE: WMT), Ross Stores, Inc. (NASDAQ: ROST), Costco Wholesale Corporation (NASDAQ: COST) and Kroger Co (NYSE: KR) have become the face of the industry. As such, we have compiled a list of the best retail stocks for 2021.
Photo by Dennis Siqueira on Unsplash
The stocks added to our list were selected based on hedge fund popularity, fundamentals, analysts’ ratings, and future growth potential based on core business strengths.
Investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s now look at the 15 best retail stocks for 2021.
Best Retail Stocks for 2021
15. GameStop Corp. (NYSE: GME)
Number of Hedge Fund Holders: 13
GameStop Corp. (NYSE: GME) is a retailer in the computer and video games sector and provides entertainment products through its e-commerce properties and different stores in the US and internationally. The company sells new and used gaming consoles, accessories, video game software, and in-digital currency, among other things. It ranks 14th on our list of the best retail stocks for 2021.
By the end of the first quarter of 2021, 13 hedge funds out of the 866 tracked by Insider Monkey held stakes in GameStop Corp. (NYSE: GME), worth roughly $96.4 million. This is compared to the previous quarter’s 27 hedge fund holders with a total stake value of roughly $322 million. Like Amazon.com, Inc. (NASDAQ: AMZN), Shopify Inc. (NYSE: SHOP), Walmart Inc (NYSE: WMT), Ross Stores, Inc. (NASDAQ: ROST), Costco Wholesale Corporation (NASDAQ: COST) and Kroger Co (NYSE: KR), GameStop Corp. (NYSE: GME) is one of the best retail stocks to buy in 2021.
Rhizome Partners, an investment management firm, mentioned GameStop Corp. (NYSE: GME) in their first quarter 2021 investor letter. Here’s what they said:
“The first quarter saw some bizarre market reactions. Game Stop is a heavily shorted legacy video game retailer that saw its stock price rise from $17 to a peak of $483 within a month. It appears that retail investors on a Reddit.com forum called WallStreetBets used memes to create a viral feedback loop of forced buying. Game Stop reached $20 billion in market cap and had more daily trading volume than Apple at one point. The Game Stop short squeeze became a black swan event for the short sellers. Large hedge funds such as Melvin Capital suffered 50% losses during a short period and required emergency capital injections that resulted in costly dilution. Shorting is difficult and introduces a risk of ruin. This is especially true in situations where a large percentage of the float is shorted. We want to remind you that we hedge our portfolio via index puts, sector puts, and sometimes buying puts directly in our own portfolio companies. However, we rarely short because 1) we are not good at it 2) the potential for brain damage is too high and 3) we want to avoid the risk of ruin.”
14. Big Lots, Inc. (NYSE: BIG)
Number of Hedge Fund Holders: 20
Big Lots, Inc. (NYSE: BIG) is a retailer operating in the US and offering various products such as furniture, seasonal décor, and food and beverage or grocery products. The company ranks 13th on our list of the best retail stocks for 2021
This May, Big Lots, Inc. (NYSE: BIG) announced its $0.3 per share quarterly dividend with a forward yield of 1.86%. The new dividend will be payable on June 25th. In the first quarter of 2021, the company’s EPS was valued at $1.26, beating estimates by $0.86. Its revenue stood at $1.44 billion, demonstrating an 11.06% growth year over year and beating estimates by $116.75 million. Big Lots, Inc. (NYSE: BIG) has a forward PE ratio of 10.37 and a gross profit margin of 40.41%. The stock has gained 50.36% in the past 6 months and 59.24% year to date.
By the end of the first quarter of 2021, 20 hedge funds out of the 866 tracked by Insider Monkey held stakes in Big Lots, Inc. (NYSE: BIG), worth roughly $229 million. This is compared to the previous quarter’s 19 hedge fund holders with a total stake value of roughly $152 million. Like Amazon.com, Inc. (NASDAQ: AMZN), Shopify Inc. (NYSE: SHOP), Walmart Inc (NYSE: WMT), Ross Stores, Inc. (NASDAQ: ROST), Costco Wholesale Corporation (NASDAQ: COST) and Kroger Co (NYSE: KR), Big Lots, Inc. (NYSE: BIG) is one of the best retail stocks to buy in 2021.
13. Overstock.com, Inc. (NASDAQ: OSTK)
Number of Hedge Fund Holders: 31
Overstock.com, Inc. (NASDAQ: OSTK) is an online retailer operating in the US through Retail, tZERO, and Medici Ventures, which are the company’s segments. It offers furniture, home décor, and other products on its websites which include overstock.com, o.co, overstock.ca, and overstockgovernment.com. The company ranks 12th on our list of the best retail stocks in 2021.
On June 1st, Overstock.com, Inc. (NASDAQ: OSTK) began rising after a report that the crypto trading platform tZERO may be sold. The company’s options include finding a strategic partner to control the tZERO business or take it public through a SPAC. In the first quarter of 2021, Overstock.com, Inc. (NASDAQ: OSTK) had EPS valued at $0.37 versus estimates of $0.07, and its revenue came in at $659.86 million, representing an 87.69% growth year over year and beating estimates by 77.51 million. The stock has a gross profit margin of 22.96% and has gained 55.48% in the past 6 months and 83.02% year to date.
By the end of the first quarter of 2021, 31 hedge funds out of the 866 tracked by Insider Monkey held stakes in Overstock.com, Inc. (NASDAQ: OSTK), worth roughly $168 million. This is compared to the previous quarter’s 24 hedge fund holders with a total stake value of roughly $157 million. Like Amazon.com, Inc. (NASDAQ: AMZN), Shopify Inc. (NYSE: SHOP), Walmart Inc (NYSE: WMT), Ross Stores, Inc. (NASDAQ: ROST), Costco Wholesale Corporation (NASDAQ: COST) and Kroger Co (NYSE: KR), Overstock.com, Inc. (NASDAQ: OSTK) is one of the best retail stocks to buy in 2021.
12. Qurate Retail, Inc. (NASDAQ: QRTEA)
Number of Hedge Fund Holders: 31
Qurate Retail, Inc. (NASDAQ: QRTEA) is a retailer in the video and online commerce industries in North America, Europe, and Asia. The company’s products include live televised shopping programs, Internet, and mobile applications for nearly 218 million households. It also provides apparel and home accessories. The company ranks 11th on our list of the best retail stocks for 2021.
In the first quarter of 2021, Qurate Retail, Inc. (NASDAQ: QRTEA) had an EPS of $0.48 versus estimates of $0.28, and its revenue came in at $3.34 billion, representing a 14.28% growth year over year and beating estimates by $208.67 million. The company also has a gross profit margin of 34.5% and a forward PE ratio of 6.08. Qurate Retail, Inc. (NASDAQ: QRTEA) gained 21.37% in the past 6 months and 22.06% year to date.
By the end of the first quarter of 2021, 31 hedge funds out of the 866 tracked by Insider Monkey held stakes in Qurate Retail, Inc. (NASDAQ: QRTEA) worth roughly $776 million. This is compared to the previous quarter’s 36 hedge fund holders with a total stake value of roughly $831 million. Like Amazon.com, Inc. (NASDAQ: AMZN), Shopify Inc. (NYSE: SHOP), and Alphabet Inc. (NASDAQ: GOOG), Qurate Retail, Inc. (NASDAQ: QRTEA) is a good stock to invest in.
Weitz Investment Management, an investment management firm, mentioned Qurate Retail, Inc. (NASDAQ: QRTEA) in their Q4 2020 investor letter. Here’s what they said:
“The strongest performance for the calendar year came from Qurate Retail, Inc. (NASDAQ: QRTEA). Starting from a very low valuation, shares rallied as the business’s turnaround gained traction, in turn giving management the confidence to return a substantial amount of capital to shareholders, including distributing $3 per share in special dividends (more than one-third of the start-of-year stock price).”
11. Ross Stores, Inc. (NASDAQ: ROST)
Number of Hedge Fund Holders: 48
Ross Stores, Inc. (NASDAQ: ROST) is an off-price retail apparel and home fashion store operator in the US. Some of the company’s brands include the Ross Dress for Less and dd’s DISCOUNTS brands. It ranks 10th on our list of the best retail stocks for 2021.
On June 14th, Morgan Stanley commented that Ross Stores, Inc. (NASDAQ: ROST) would be able to grab more market share in light of apparel price inflation and higher out-of-the-door prices in malls and departmental stores. The firm decided to retain its Overweight rating for the company alongside its $140 price target. Ross Stores, Inc. (NASDAQ: ROST) also has a Buy-equivalent or better rating at 20 out of 26 other firms.
In the first quarter of 2021, Ross Stores, Inc. (NASDAQ: ROST) had EPS valued at -$0.29, missing estimates by -$0.31, and brought in revenue valued at $1.84 billion, missing estimates by $193.64 million. The company has a gross profit margin of 32.22% and has gained 2.21% in the past 6 months and 3.14% year to date.
By the end of the first quarter of 2021, 48 hedge funds out of the 866 tracked by Insider Monkey held stakes in Ross Stores, Inc. (NASDAQ: ROST), worth roughly $976 million. This is compared to the previous quarter’s 57 hedge fund holders with a total stake value of roughly $1.3 million. Like Amazon.com, Inc. (NASDAQ: AMZN), Shopify Inc. (NYSE: SHOP), and Alphabet Inc. (NASDAQ: GOOG), Ross Stores, Inc. (NASDAQ: ROST) is a good stock to invest in.
Bretton Fund mentioned Ross Stores, Inc. (NASDAQ: ROST) in their fourth-quarter 2020 investor letter. Here’s what they said:
“Not surprisingly, Ross and TJX were among the hardest hit in our portfolio. In spring, almost all of their stores were closed. As health officials found that masks and distancing could significantly reduce transmission, the stores were able to reopen and continue operating during the recent winter surges. We estimate earnings per share declined roughly 80% for both companies. Most of the losses came from the second-quarter shutdowns, yet by the third quarter, sales were roughly the same as pre-crisis levels, which was honestly a little surprising to us. People really love their off-price apparel. Ross’s stock returned 5.8% and TJX’s 12.3%.”
10. Dollar General Corporation (NYSE: DG)
Number of Hedge Fund Holders: 52
Dollar General Corporation (NYSE: DG) is a discount retailer providing merchandise products in the southern, southwestern, midwestern, and eastern US. Its products include consumable products like paper towels, bath tissues, and paper dinnerware, and packaged food comprising cereals and other canned foods, among other things. The company ranks 9th on our list of the best retail stocks for 2021.
In the first quarter of 2021, Dollar General Corporation (NYSE: DG) had EPS valued at $2.56, beating estimates by $0.82, and its revenue came in at $8.45 billion, representing a growth of 7.64% year over year and beating estimates by $789.45 million. The company has a gross profit margin of 32.38% and has gained 1.06% in the past 6 months and 1.76% year to date.
By the end of the first quarter of 2021, 52 hedge funds out of the 866 tracked by Insider Monkey held stakes in Dollar General Corporation (NYSE: DG), worth roughly $2.34 billion. This is compared to the previous quarter’s 57 hedge fund holders with a total stake value of roughly $1.67 billion.
Polen Capital, an investment management firm, mentioned Dollar General Corporation (NYSE: DG) in their first quarter 2021 investor letter. Here’s what they said:
“We have eliminated Dollar General to fund the purchase of Amazon, which we consider a superior investment opportunity. We feel Dollar General has been an excellent “Safety” holding for us, especially in 2020. Since our initial purchase in July 2016, Dollar General shares have more than doubled, beating the S&P 500 and slightly underperforming the Index (our actual returns were higher, as we had added to the position on a drawdown soon after our initial purchase).
During the COVID drawdown in early 2020, Dollar General declined 10% versus 25% for the Index and 29% for the S&P 500. We had expected the company to grow its store footage 5% per year with same-store sales increasing 2-3% and yielding revenue growth of 7-8% over the long term. Slight margin expansion would lead to 10%+ EPS growth, according to our research.
2020 could have pulled forward more than three years of revenue and earnings growth into a single year. The pandemic and quarantining led people to stock up on everyday consumables, and stimulus checks and extended and elevated unemployment benefits have allowed Dollar General customers to spend more. In fact, the company recently reported full-year 2020 results in which revenue grew 22% and EPS grew 60%. These results included over 200 basis points of margin expansion off a low base of 8.3% operating margins in 2019. This compares to margin expansion of tens of basis points in typical market environments. Dollar General now has over 17,000 stores. There could be more than three years of approximately 5% annual square-footage growth left before maturing at over 20,000 stores. Same-store sales growth could be in the 3-4% range for some time, and we think the company remains extremely well run. We simply believe our investment in Amazon is a superior alternative.”
9. Etsy, Inc. (NASDAQ: ETSY)
Number of Hedge Fund Holders: 53
Etsy, Inc. (NASDAQ: ETSY) operates a two-sided online marketplace to connect buyers to sellers in the US and internationally. Its online marketplaces include Etsy.com and Reverb.com, and the company offers about 85 million products on its platforms. The company ranks 8th on our list of the best retail stocks for 2021.
On June 3rd, ARK Invest’s Next Generation Internet ETF was reported to have taken up 157,181 more shares of Etsy, Inc. (NASDAQ: ETSY) after the latter acquired Depop for $1.625 billion this June. This acquisition is expected to be profitable for the company, introducing it to a new market. In the first quarter of 2021, the company’s EPS was valued at $1.07 versus estimates of $0.92, and its revenue came in at $550.65 million, demonstrating growth of 141.45% year over year and beating estimates by $20.28 million. Etsy, Inc. (NASDAQ: ETSY) also has a gross profit margin of 74.36% and has gained 4.02% year to date.
By the end of the first quarter of 2021, 53 hedge funds out of the 866 tracked by Insider Monkey held stakes in Etsy, Inc. (NASDAQ: ETSY), worth roughly $1.64 billion. This is compared to the previous quarter’s 56 hedge fund holders with a total stake value of roughly $1.96 billion. Like Amazon.com, Inc. (NASDAQ: AMZN), Shopify Inc. (NYSE: SHOP), Walmart Inc (NYSE: WMT), Ross Stores, Inc. (NASDAQ: ROST), Costco Wholesale Corporation (NASDAQ: COST) and Kroger Co (NYSE: KR), Etsy, Inc. (NASDAQ: ETSY) is one of the best retail stocks to buy in 2021.
Polen Capital, an investment management firm, mentioned Etsy, Inc. (NASDAQ: ETSY) in their first quarter 2021 investor letter. Here’s what they said:
“Etsy continued to be a top contributor in the Portfolio during the first quarter. Etsy, Inc. (NASDAQ: ETSY) experienced record levels of demand in 2020. Throughout the beginning of this year, the business has continued to see accelerated growth trends. The company’s recently announced fourth quarter results provided numerous data points that highlight Etsy’s success in both broadening and deepening the relationship it has with buyers and sellers on its platform. In fact, Etsy, Inc. (NASDAQ: ETSY) now stands as the fourth largest e commerce site in the U.S. Repeat buyers have grown nearly 100% year-over-year, despite mask sales, which grew rapidly at the onset of the pandemic, shrinking to less than 5% of sales.
We continue to believe Etsy remains in the early stages of growing out its platform.
We remain confident in its ability to compound its value for shareholders at an attractive rate going forward.”
8. Costco Wholesale Corporation (NASDAQ: COST)
Number of Hedge Fund Holders: 56
Costco Wholesale Corporation (NASDAQ: COST) operates membership warehouses in the US and internationally. The company offers branded and private label products in various merchandise categories, alongside dry and packaged food and groceries. The company ranks 7th on our list of the best retail stocks for 2021.
On June 3rd, Costco Wholesale Corporation (NASDAQ: COST) reported an increase in its May sales by about 22.8%. In the first quarter of 2021, the company’s EPS was valued at $2.29 versus estimates of $2.04, and its revenue came in at $43.21 billion, representing a 16.65% growth year over year and beating estimates by $949.84 million. Costco Wholesale Corporation (NASDAQ: COST) also has a gross profit margin of 13.07% and has gained 8.51% in the past 6 months and 3.29% year to date.
By the end of the first quarter of 2021, 56 hedge funds out of the 866 tracked by Insider Monkey held stakes in Costco Wholesale Corporation (NASDAQ: COST), worth roughly $4.01 billion. This is compared to the previous quarter’s 61 hedge fund holders with a total stake value of roughly $3.61 billion. Like Amazon.com, Inc. (NASDAQ: AMZN), Shopify Inc. (NYSE: SHOP), Walmart Inc (NYSE: WMT), Ross Stores, Inc. (NASDAQ: ROST) and Kroger Co (NYSE: KR), Costco Wholesale Corporation (NASDAQ: COST) is one of the best retail stocks to buy in 2021.
ClearBridge Investments, an investment management firm, mentioned Costco Wholesale Corporation (NASDAQ: COST) in their first quarter 2021 investor letter. Here’s what they said:
“To take a more discretionary stance in retailing and make room for our additional purchases where we see better opportunities, we closed our position in Costco Wholesale. Costco was a big winner during the most restrictive periods of the COVID-19 lockdowns with its focus on staples, larger basket size, necessities and bulk items, and it remains an exceptional retailer in its category, with a sticky subscription base and non-U.S. growth ahead. However, the company is facing very tough comparisons as well as margin pressure in its core business and we believe its valuation has become stretched.”
7. Walmart Inc. (NYSE: WMT)
Number of Hedge Fund Holders: 58
On June 24th, Citi reiterated a Buy rating on Walmart Inc. (NYSE: WMT) because of the upcoming busy time in the retail sector. Walmart Inc. (NYSE: WMT) also teamed up with Green Dot Corporation (NYSE: GDOT) this June, to launch the Walmart MoneyCard. In the fiscal first quarter of 2021, Walmart Inc. (NYSE: WMT) has EPS of $1.18, beating estimates by $0.09 while its revenue came in at $133.67 billion, representing an 8.72% growth year over year and beating estimates by $2.76 billion. The stock has gained 14.37% in the past year.
By the end of the first quarter of 2021, 58 hedge funds out of the 866 tracked by Insider Monkey held stakes in Walmart Inc. (NYSE: WMT). The total value of their stakes came up to roughly $5.88 billion. This is compared to 70 hedge fund holders in the previous quarter with a total stake value of approximately $6.19 billion.
6. L Brands, Inc. (NYSE: LB)
Number of Hedge Fund Holders: 59
L Brands, Inc. (NYSE: LB) is a retailer of home fragrance products, body care products, soaps, sanitizers, women’s apparel, and personal and beauty care products. The company has two segments, namely the Bath & Body Works and Victoria’s Secret segments. It ranks 6th on our list of the best retail stocks for 2021.
On June 22nd, Deutsche Bank passed favorable comments on L Brands, Inc. (NYSE: LB) and reiterated its Buy rating alongside its $88 price target. In the first quarter of 2021, its EPS was valued at -$0.99, missing estimates by -$0.25, and its revenue came in at $1.65 billion, missing estimates by $66.1 million. L Brands, Inc. (NYSE: LB) also has a gross profit margin of 50.21% and a forward PE ratio of 11.87. The stock has gained 80.79% in the past 6 months and 78.91% year to date.
By the end of the first quarter of 2021, 59 hedge funds out of the 866 tracked by Insider Monkey held stakes in L Brands, Inc. (NYSE: LB), worth roughly $5.93 billion. This is compared to the previous quarter’s 52 hedge fund holders with a total stake value of roughly $3.9 billion. Like Amazon.com, Inc. (NASDAQ: AMZN), Shopify Inc. (NYSE: SHOP), Walmart Inc (NYSE: WMT), Ross Stores, Inc. (NASDAQ: ROST), Costco Wholesale Corporation (NASDAQ: COST) and Kroger Co (NYSE: KR), L Brands, Inc. (NYSE: LB) is one of the best retail stocks to buy in 2021.
Click to continue reading and see the 5 Best Retail Stocks for 2021.
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Disclosure: None. 10 Best Retail Stocks for 2021 is originally published on Insider Monkey.
