Of late, one of my favorite data analytics platforms for making investment decisions has been Placer.ai, which leverages smartphone location data to build real-time, in-store traffic models for retailers and merchants of all shapes and sizes. That being said, if you have an interest in retail stocks, you should be paying attention here.
Why have I been a fan of Placer.ai recently? Because their data insights have been spot-on, and had you used those insights to make investment decisions, you would’ve made a nice chunk of change.
For example, in late November, Placer.ai released a report on Dicks Sporting Goods (NYSE:DKS), wherein the company noted that foot traffic trends for the sporting goods retailer had materially improved over the previous few months. A day later, Dicks reported blowout third-quarter numbers, and DKS stock rose mearly 20%.
Also in that report, Placer.ai highlighted Best Buy (NYSE:BBY) as having favorable foot traffic trends. Also a day later, Best Buy reported great third-quarter numbers — and BBY stock has since risen more than 20%.
These are just a few examples. As a long-time follower of Placer.ai, I can recall many, many more examples of where spot-on Placer.ai data helped me make a profitable investment decision.
Given all that, when Placer.ai releases its list of top retail companies to watch in 2020 like they recently did, you should check them out. With all of that in mind, let’s look at five retail stocks Placer.ai thinks can win big in 2020.
Retail Stocks to Watch for 2020: Target (TGT)
Why Placer.ai Likes Them: Placer.ai likes general merchandise retailer Target (NYSE:TGT) in 2020 because of the company’s multi-faceted push to expand share of wallet in the upper income demographic. That is, Placer.ai feels that through various initiatives — including opening Disney (NYSE:DIS) and Toys-R-Us locations on-site, and launching multi-format stores in urban areas — Target is turning into the preferred retail destination for upper-income households. Placer.ai further believes that this deeper expansion into the upper-income demographic should propel even further growth in 2020.
What I Think: I like TGT stock heading into 2020. The company is absolutely on fire, and there’s no reason to believe that the momentum will slow this year. Target’s big growth initiatives still have firepower, while the consumer remains as strong as ever. This is supported by strong labor markets, healthy wage gains and strong economic and market sentiment. Sure, TGT stock has come very far, very fast. But at 19-times forward earnings, it’s still cheaper than your average consumer discretionary stock.
So, all in all, it does look like Target will remain red-hot in 2020. And, that TGT stock will grind higher to become a great retail stock to add to your portfolio.
Why Placer.ai Likes Them: Fast casual Mexican eatery Chipotle (NYSE:CMG) has been on a huge rebound ever since new management took over in early 2018. A handful of catalysts including leveraged unique marketing, menu innovations, digital business expansion and relevant promotions have once again helped turn the quick-service restaurant into one of the most popular fast dining destinations in America. Placer.ai expects this rebound to continue in 2020, driven by smart and strategic decision making from a proven management team.
What I Think: Much like Target, Chipotle should be able to sustain its healthy operational momentum into 2020 for two big reasons. First, the company’s growth initiatives continue to work. The aforementioned catalysts will continue to differentiate Chipotle in the crowded quick-service market over the next few quarters. Second, the consumer will remain strong. So, as they continue to spend big on eating out over the next few quarters, they will up their spend on differentiated quick-service restaurants like Chipotle.
Yes, CMG stock is richly valued. Yes, most of the upside is priced; But, not all of it. Consequently, CMG stock will likely push to all-time highs over the next 12 months.
Bed Bath & Beyond (BBBY)
Why Placer.ai Likes Them: Placer.ai believes that struggling home-ware retailer Bed Bath & Beyond (NASDAQ:BBBY) is set to do in 2020, something very similar to what Chipotle did in 2018 and 2019. That is, thanks to a new management team with a proven track record, Placer.ai believes that Bed Bath & Beyond is strategically positioned to end several years of declines, and get back to growing in 2020.
What I Think: I really like BBBY stock in 2020. New CEO Mark Tritton is an impressive individual who was influential in the huge Target turnaround. Importantly, the same strategy which sparked that aforementioned big Target improvement could be employed to spark a Bed Bath & Beyond turnaround.
Furthermore, this strategy will start to materialize in 2020. And as it does, sales and profit trends should start to stabilize.
This stabilization will breathe hope back into investors. This, in turn, will spark a huge rally in depressed and beaten-up BBBY stock.
Why Placer.ai Likes Them: Specialty pharmacy retailer CVS (NYSE:CVS) found its groove again in mid-to-late 2019 as the company tremendously successful in the early roll-out of HealthHUB locations. That said, CVS will more aggressively expand HealthHUB services by the end of 2020. As they do, Placer.ai expects the late 2019 rebound in CVS’ growth trend, to persist and potentially even accelerate higher.
What I Think: There are a few things to like about CVS stock in 2020. First, as Placer.ai mentioned, the continued roll-out of HealthHUB locations will provide a meaningful sales tailwind throughout the whole year. Second, Amazon (NASDAQ:AMZN) related competition concerns should ease, as the e-commerce giant’s big pharmacy push gets delayed even further. Third, adverse legislative headwinds from the opiod crisis will fade into the rear-view mirror. Fourth, CVS stock is dirt cheap at nearly 11-time forward earnings with a big yield (2.7%) in a world of extended valuations and low yields.
Overall, there’s enough to like about CVS stock in 2020 that there will likely be more buyers than sellers for most of the year. Naturally, that means CVS stock should move higher and be on your list of retail stocks to buy.
Why Placer.ai Likes Them: Placer.ai believes that specialty cosmetics retailer Ulta (NASDAQ:ULTA) has, over the past few years, consistently made the right strategic decisions to turn into the go-to, omnichannel shopping destination for all things beauty. The team at Placer.ai further believes that this trend will persist for the next several years, too. This is due to more personalized shopping experiences, store remodels, loyalty programs and expansion of the in-store beauty bar.
What I Think: Ulta is the choice retailer in one of the hottest segments in the consumer discretionary sector, and I don’t think any of this will change anytime soon. Cosmetics spend will only keep growing, as young, social-media-obsessed consumers will become more aware of how they look. And ultimately, spend more and more on enhancing their looks. At the same time, Ulta is doing everything right to sustain its leadership positioning in the space. Most importantly, this includes partnering with high-demand brands to be the exclusive physical retailer of these high-demand brands.
So long as Ulta remains the top dog in the cosmetics space, their big-picture growth trends will remain healthy. With that, ULTA stock will remain on a long-term uptrend and be a great retail stock to buy.
As of this writing, Luke Lango was long BBBY and CVS.