The market has been forgiving to most of the retail sector for the entirety of 2015.
Waiting and waiting for a consumer rebound in spending has cost investors dearly. The decimation in certain names has been stunning. In just the past two weeks, names that we couldn’t believe would fall further did just that.
Department stores were particularly hit hard, starting with class-act Macy’s (M).
They may be throwing a Thanksgiving parade, but not to celebrate robust and growing profits.
A miss in expectations when earnings were reported resulted in shares falling some 20%.
For the sane, such a haircut is hard to fathom. Such is life in the hyper-trading world of Wall Street.
The only way to survive such a market is to pounce on opportunities when present.
With interest rates starting to rise on the heels of strengthening economy, the wait for the rebound in spending is just around the corner.
2016 will be the year of the retailer.
Before Thanksgiving arrives, look to buy these three beaten down retailers:
Like Macy’s, Nordstrom (JWN) was pummeled after a disappointing earnings report. What a great opportunity to buy a quality name at a cheap price.
Blame much of the disappointment on warm weather. Retailers like Nordstrom rotate inventory with the seasons. When the seasons come later than expected, sales will be lower.
Look for Nordstrom to bounce back in a big way in 2016.
If JCPenney (JCP) disappeared, would they be missed? While there’s arguably too much capacity in the department store sector, Penney has some serious fans.
In fact, when the company reported earnings recently, you could see how dedicated those fans can be. Sales and earnings beat expectations in the reported quarter. Still, shares fell given the weakness in retail stocks.
The company appears to be on the rebound and shares are cheap. Buy the stock before Thanksgiving and you’ll likely be rewarded in 2015.
Deckers Outdoor (DECK)
Technically not a retailer, Deckers (DECK) is a great way to play an uptick in retail spending.
The maker of Ugg boots and Teva sandals is poised for a huge 2016. For the just-completed quarter, the company beat earnings estimates, which helped lift shares.
While they have a long way to go, as the stock is trading for half of what shares fetched earlier in the year, double-digit profit growth is expected in 2016 and the stock trades for a low multiple of earnings.
With colder weather finally on its way, sales could exceed expectations. If so, shares of Deckers will be a big winner for your 2016 portfolio.
This post originally appeared in Main Street Investor.com.
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