According to Aggregated Portfolio statistics, the three most-broadly-owned consumer discretionary retail stocks are Amazon.com Inc. (NASDAQ:AMZN), Alibaba Group Holding Ltd. (NYSE:BABA) and Lowe's Companies Inc. (NYSE:LOW), while the three most-broadly-owned consumer staples retail stocks are Costco Wholesale Corp. (NASDAQ:COST), Walmart Inc. (NYSE:WMT) and Target Corp. (NYSE:TGT).
CNBC columnist Keris Lahiff said Friday morning that better-than-expected earnings from retailers "set the retail space ablaze." The SPDR S&P 500 Retail ETF (XRT) reached a five-day high of $40.16, up 2.44% from Monday's open of $39.20.
Two different types of retail
The retail sector contains two different types of companies: consumer discretionary retail and consumer staples retail. The former includes companies that retail nonessential goods like dresses, jewelry and name-brand shoes. Demand for such goods are sensitive to changes in the business cycle as consumers tend to cut down on nonessential expenses during economic downturns.
On the other hand, consumer staples retail includes companies that market essential goods like groceries, pharmaceutical products and everyday-use clothing and toiletries. Demand for such goods is not as sensitive to changes in the business cycle. Even during an economic downturn, consumers must still purchase the necessary goods for everyday life.
Most-broadly-held consumer discretionary retail stock: Amazon
Thirty-five gurus own shares of Amazon as of the June quarter, including Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B). The combined portfolio weight among gurus is 88.30%.
GuruFocus ranks the Seattle-based retail giant's profitability 8 out of 10 on several positive indicators, which include expanding profit margins and a three-year revenue growth rate that outperforms 86.83% of global competitors. Additionally, Amazon's business predictability ranks four stars out of five on consistent revenue and earnings growth over the past 10 years.
Berkshire owns 537,300 shares of Amazon as of quarter-end, up 11.17% from the prior quarter. Other gurus with holdings in Amazon include Ken Fisher (Trades, Portfolio) and Spiros Segalas (Trades, Portfolio).
Thirty gurus own shares of Alibaba with a combined weight of 102.30%. Gurus with large holdings include PRIMECAP Management (Trades, Portfolio) and Steve Mandel (Trades, Portfolio).
Alibaba operates several of China's most-visited online marketplaces, which include Taobao and Tmall. GuruFocus ranks the company's profitability 6 out of 10: Although the profit margins are outperforming over 92.25% of global competitors, Alibaba's business predictability ranks just 2.5 stars out of five, suggesting good but inconsistent revenue and earnings growth.
Twenty-three gurus own shares of Lowe's with a combined weight of 27.16%. Pershing Square manager Bill Ackman (Trades, Portfolio) owns 8,900,535 shares, down 4.45% from the prior quarter.
The Mooresville, North Carolina-based company said on Wednesday that adjusted net earnings for the quarter ending Aug. 2 were $2.15 per share, outperforming the consensus estimate of $2.01 per share by 14 cents and up 8 cents from the prior-year quarter. CEO Marvin Ellison said strong spring demand, strong holiday event promotion and growth in the company's Paint and Pro businesses contributed to strong comparable sales and earnings performance during the quarter.
Despite strong comp sales during the quarter, Lowe's' five-star business predictability rank is on watch as the company's revenue growth has decelerated over the trailing 12 months.
Most-broadly-held consumer staples retail stock: Costco
Sixteen gurus own shares of Costco with a combined weight of 6.07%. Buffett's conglomerate owns 4,333,363 shares as of quarter-end.
GuruFocus ranks the Issaquah, Washington-based wholesaler's profitability 6 out of 10: Although the company's return on assets outperforms 81.18% of global competitors, Costco's operating margin and three-year revenue growth underperforms over 53% of global competitors. Despite this, Costco's business predictability ranks 4.5 stars out of five on strong and consistent revenue and earnings growth over the past 10 years.
Sixteen gurus own shares of Walmart with a combined weight of 12.85%. Microsoft Corp. (NASDAQ:MSFT) founder Bill Gates (Trades, Portfolio) owns 11,603,000 shares as of quarter-end.
GuruFocus ranks the Bentonville, Arkansas-based discount retailer's financial strength 5.5 out of 10: Although the company has a strong Altman Z-score of 4.09 and a solid Piotroski F-score of 5, Walmart's cash-to-debt and debt-to-equity ratios are underperforming over 70% of global competitors.
Fifteen gurus own shares of Target with a combined weight of 13.29%. Gurus with large holdings include Jim Simons (Trades, Portfolio)' Renaissance Technologies and Pioneer Investments (Trades, Portfolio).
Shares of Target reached a new all-time high on Wednesday as the company reported earnings that outperformed analyst estimates.
Disclosure: Author is long Costco.
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This article first appeared on GuruFocus.
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