Below we present the list of Top 5 Retail Stocks to Buy Now. For our methodology and a more comprehensive list please see Top 10 Retail Stocks to Buy Now. Note that all hedge fund data is based on the exclusive group of 800+ funds tracked by Insider Monkey as part of our market-beating investment strategy.
5. Walmart Inc. (NYSE:WMT)
While it was one of the Top 5 Stocks Billionaire Ray Dalio Just Bought, the world’s largest retailer nonetheless trails several smaller rivals when it comes to hedge fund ownership. Hedge funds are quickly growing more bullish though. Walmart Inc. (NYSE:WMT) was owned by 69 hedge funds on September 30, which is approaching five-year highs and is a greater than 30% increase this year.
While WMT shares are more expensive than ever according to several metrics, there’s nonetheless a lot to like about the big box behemoth’s growth prospects as it mounts a serious challenge to Amazon.com, Inc. (NASDAQ:AMZN)’s e-commerce supremacy. Walmart’s new subscription service is off to a fast start according to a recent Piplsay Research survey, which estimates that 11% of Americans are already members. Walmart grew its online sales by 94% in Q2 and by 97% in Q3, while sales on its Marketplace grew by triple digits.
4. Costco Wholesale Corporation (NASDAQ:COST)
Hedge fund ownership of Costco Wholesale Corporation (NASDAQ:COST) has surged by 83% since the middle of 2019 as the membership-based operator of warehouse clubs continues to excel even in the face of intense e-commerce competition for consumer dollars.
Costco is another retailer that’s been in big demand during the pandemic given the vast array of products it carries under one (giant) roof and the ability for consumers to stockpile goods at discount prices. Costco grew sales by 17% during its fiscal Q1 ended November 30, while earnings per share for its fiscal 2020 jumped by 20% to $9.85.
The company had a record quarter for membership renewals at nearly 91% during its latest fiscal quarter and even grew its online sales by 70.9% year-over-year in November. COST shares have been on a good run for several years and are expensive from a historical standpoint however, trading at 37x earnings and nearly 11x book value.
3. The Home Depot, Inc. (NYSE:HD)
Home improvement retailer The Home Depot, Inc. (NYSE:HD) has been one of hedge funds’ favorite retail stocks for years, peaking at the end of 2019 with 90 funds long HD. That figure had fallen to 73 by the end of Q3 however, with some hedge funds perhaps fearing that the housing market would suffer during the pandemic.
HD bull Ensemble Capital expressed as much in its Q1 investor letter, anticipating that the housing market would come to a standstill during the crisis, but would explode once more coming out of it. That hasn’t been the case however and Home Depot has continued to perform extremely well, growing sales by 23% and earnings by 26% in Q3.
Ensemble Capital also noted that while Home Depot would survive the pandemic, mom-and-pop hardware stores were less likely to do so, allowing Home Depot to further grow its market share at the same time home improvement activity begins surging again.
2. The TJX Companies, Inc. (NYSE:TJX)
The number of hedge funds long The TJX Companies, Inc. (NYSE:TJX) has doubled since the middle of 2018, hitting 78 at the end of September. The pandemic did not scare hedge funds away from the apparel retailer at all, as weakness in the stock prompted more hedge funds to go long TJX as 2020 progressed.
Qualivian Investment Partners laid out some of the reasons why hedge funds love TJX in its Q2 investor letter, calling its off-price model one of the best in the retail landscape and claiming that many investors still misunderstand the sustainability of it. Some supply chain and inventory issues have affected TJX during the pandemic, but they are short-term and the company has a strong financial position to carry it through the pandemic, having $6.6 billion in cash as of the middle of 2020.
1. Lowe’s Companies, Inc. (NYSE:LOW)
Lowe’s Companies, Inc. (NYSE:LOW) is the top retail stock to buy now, being owned by 83 hedge funds on September 30. That ranked it just outside the 30 Most Popular Stocks Among Hedge Funds, coming in at 31st.
Like rival Home Depot, Lowe’s has done very well during the pandemic, fueled in part by home improvement projects as homeowners reconfigure their homes for work and exercise. Lowe’s same store sales jumped by over 30% in Q3, while revenue grew by 28% and adjusted earnings were up by 40%.
Although Lowe’s isn’t as operationally efficient as Home Depot yet, hedge funds appear to believe its shares are quite a bit cheaper, which is supported by numerous valuation metrics. The retailer clearly agrees, as it just announced plans to utilize its strong balance sheet to buyback up to $15 billion worth of its shares, which have gained 35% this year and rank as the top retail shares to buy on the market.
If you’re looking for investment ideas in an exciting and rapidly growing industry, be sure to check out the 10 Best Data Center Stocks to Buy Now.
Disclosure: None.
