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Barron's: The 3 Best Retail Stocks So Far This Year

Barron's: The 3 Best Retail Stocks So Far This Year

By    |   Wednesday, 04 September 2019 09:45 AM

A trio of retail stocks have been able to rise above investor fears about the health of the economy and the trade war by finding ways to connect with shoppers amid robust consumer confidence.

Barron’s recently took a look at the three best-performing retail stocks in the S&P 500 through last week.

Target stock (TGT) has risen 66% so far this year up to Labor Day. The shares soared following Target’s most recent earnings report and news that it is partnering with Walt Disney (DIS) to sell Disney products in a select number of “shop-in-shop” Target stores, Barron’s reported.

The second best retail component in the S&P is discounter Dollar General (DG), with the stock’s year-to-date gain at 46%. “Dollar stores tend to be counter cyclical,” wrote BMO Capital Markets analyst Kelly Bania in a research report. Barron’s explained that Bania believes management’s sales and profit margin improvement plans will keep the stock working for investors over the balance of the year.

EBay stock (EBAY) has had a good year, as well, rising 45%. “The company has been returning money to shareholders and announced strategic and operating reviews at the behest of activist investors,” Barron’s explained.

To be sure, U.S. consumer spending increased solidly in July as households bought a range of goods and services, which could further allay financial market fears of a recession, but the strong pace of consumption is unlikely to be sustained amid tepid income gains.

The report from the Commerce Department on Friday added to July trade and inventory data in suggesting that while the economy was slowing, it was not losing altitude rapidly for now. But risks to the longest economic expansion in history are mounting, mostly from a year-long trade war between the United States and China.

The trade fight between the two economic giants has spooked financial markets and caused an inversion of the U.S. yield curve, which has stoked fears that the economic expansion now in its 11th year is in danger of being derailed by a recession, Reuters explained.

"Even with elevated policy uncertainty and financial market turbulence, the U.S. consumer continues to display great vitality, emboldened by a large savings buffer," said Lydia Boussour, senior U.S. economist at Oxford Economics in New York.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6% last month after an unrevised 0.3% gain in June, the government said.

Economists polled by Reuters had forecast consumer spending advancing 0.5% last month. Consumer spending is being driven by a strong labor market, which is marked by the lowest unemployment rate in nearly 50 years, and better job security.

But with Washington slapping additional tariffs on Chinese goods on Sept. 1 and in December, there are concerns that consumer spending could take a hit.

A survey from the University of Michigan on Friday showed its consumer sentiment index in August dropping by the most since December 2012, amid nervousness about the trade tensions.

Earlier this week, a survey from the Conference Board, which focuses heavily on the labor market, showed a mild drop in consumer sentiment in August. The stock market has a bigger weighting in the University of Michigan consumer sentiment survey.

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A trio of retail stocks have been able to rise above investor fears about the health of the economy and the trade war by finding ways to connect with shoppers amid robust consumer confidence.
retail, stocks, barrons, best
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2019-45-04
Wednesday, 04 September 2019 09:45 AM
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