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5 Retail Stalwarts to Consider During the 4th Quarter

According to the All-in-One Screener, a Premium feature of GuruFocus, five Peter Lynch stalwarts from the retail sector include AutoZone Inc. (NYSE:AZO), Carter's Inc. (NYSE:CRI), Ross Stores Inc. (NASDAQ:ROST), Sally Beauty Holdings Inc. (NYSE:SBH) and TJX Companies Inc. (NYSE:TJX).

Peter Lynch Stalwarts Screener overview


According to Investopedia.com, Peter Lynch defined a stalwart as a "large, well-established company that still offers long-term growth potential." GuruFocus created a built-in stalwarts screener within the All-in-One Screener with the following criteria: a business predictability rank of at least two stars, a 10-year median return on capital of at least 14%, 10 years of profitability over the past decade, a 10-year revenue growth rate between 8% and 20% and a 10-year earnings growth rate between 10% and 20%.

GuruFocus Premium users can find stocks that fit their investing criteria using our All-in-One Screener or start with one of our built-in templates.

Retail - apparel and specialty sector overview

The retail - apparel and specialty sector includes companies that engage in the sale of apparel goods or other specialty goods like furniture and jewelry. The sector is highly competitive as companies compete on several factors, including price, brand and quality. Key metrics include comparable store sales and number of stores.

Unlike the retail - defensive sector, the retail - apparel and specialty sector is sensitive to changes in the business cycle. During market downturns, consumers usually cut back on nonessential expenses and save their money on essential expenses like food, beverages and groceries. On the other hand, consumers are more likely to indulge and make discretionary purchases during booming markets.

As of Monday, the Screener listed five stalwarts within the retail - apparel and specialty sector.

AutoZone

Memphis, Tennessee-based AutoZone markets aftermarket automotive parts, tools and accessories to do-it-yourself auto customers in the U.S. GuruFocus ranks AutoZone's profitability 8 out of 10 on several positive investing signs, which include operating margins that outperform 94.28% of global competitors despite contracting approximately 2.7% per year on average over the past five years. Additionally, the website ranks AutoZone's business predictability 3.5 stars out of five on consistent revenue growth over the past 10 years.

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Gurus with large holdings in AutoZone include Tweedy Browne (Trades, Portfolio) and Jim Simons (Trades, Portfolio)' Renaissance Technologies.

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Carter's

Atlanta-based Carter's makes apparel for babies and children under its Carter's and OshKosh B'gosh brands. GuruFocus ranks the company's profitability 7 out of 10: Even though the Piotroski F-score ranks a poor 4 out of 10, Carter's' operating margin has increased approximately 2.40% per year on average over the past five years and is outperforming 85.26% of global competitors.

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Gurus with large holdings in Carter's include Diamond Hill Capital (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio).

Ross Stores

Dublin, California-based Ross Stores sells a wide range of off-price apparel and home fashion goods. GuruFocus ranks the company's profitability 7 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank, a return on equity that outperforms 97.10% of global competitors and operating margins that have increased approximately 1.20% per year on average over the past five years. Despite this, Ross Stores has a poor Piotroski F-score of 4.

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Sally Beauty Holdings

Denton, Texas-based Sally Beauty Holdings operates two segments: Sally Beauty Supply and Beauty Systems Group. GuruFocus ranks the company's profitability 8 out of 10 on several positive indicators, which include a strong Piotroski F-score of 7, a four-star business predictability rank and operating margins that outperform over 85% of global competitors despite languishing near a 10-year low of 11.26%.

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TJX Companies

Framingham, Massachusetts-based TJX Companies retails off-price apparel and home fashion goods through its TJ Maxx, Marshalls and HomeGoods stores. GuruFocus ranks the company's profitability 7 out of 10 on several positive investing signs, which include a return on equity that outperforms 97.72% of global competitors and a strong business predictability rank of four stars. Despite this, TJX's operating margins have contracted approximately 2.7% per year on average over the past five years, while the company has a poor Piotroski F-score of 4.

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Disclosure: Long Ross Stores.

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This article first appeared on GuruFocus.