In this article, we’ll examine the top 10 retail stocks for 2022. If you’d want to skip our in-depth examination of the retail market, its present trends, and its forecast, you can choose to read the 5 Best Retail Stocks To Buy Now.
In the retail sector, transactions occur across a wide range of industries, including food, automobiles, clothing, and electronics, through a variety of distribution channels. While physical or in-store retail still dominates this sector, non-store retailing strategies are also gaining ground. In many international markets, online retailing and e-commerce channels are gaining ground in the retail industry. Numerous retailers use an omnichannel concept, which tries to combine traditional and internet channels seamlessly. According to Statista, over 26 trillion dollars in sales were generated by the global retail market in 2021, and over 30 trillion dollars in sales are anticipated by 2024.
According to the National Retail Federation, retail sales are expected to grow between 6% and 8% in 2022, as consumers spend more on services instead of goods and cope with inflation. That annual forecast represents a slower pace of growth for retailers than 2021, but it’s higher than the pre-pandemic growth rate. According to Gartner estimates, e-commerce will account for approximately 17 percent of all retail sales in 2022, with an increase in the proportion of in-store purchases practically levelling off over the ensuing few years. Live commerce is a prime example, in which merchants present products, screen customers, and advertise the brand. According to IDC analysts, livestreaming capabilities will be incorporated into 40 percent of retailers’ e-commerce platforms by 2023, raising e-commerce conversion rates by at least 10 percent. Chinese sales are predicted to reach $423 billion this year, and US sales will surpass $25 billion by 2023, according to Gartner researchers.
Photo by Franki Chamaki on Unsplash
Methodology
For creating the list of top ten best retail stocks to buy now, our methodology is based on the preference of 895 elite funds in Insider Monkey’s database as of Q2 2022. We have rated these equities according to the number of hedge fund holders. Insider Monkey has long been a proponent of replicating the top stock picks of hedge funds, and over the past few years, this strategy has allowed us to outperform the market consistently.
Let’s now look at the 10 best retail stocks for 2022.
Best Retail Stocks To Buy Now
10. The TJX Companies, Inc. (NYSE:TJX)
Number of Hedge Fund Holders: 49
Total Value of Hedge Fund Holdings: $1,554 Million
Our list of ten best retail stocks starts with TJX. TJX Companies, Inc. (NYSE:TJX) has a wide selection of high-quality branded products and substantial inventory, which puts it in a good position to become the low-cost retailer of choice. On the other hand, the current macroeconomic environment is probably going to have an effect on TJX’s operations, including increased freight and labor expenses, leading to decreasing margins.
According to the Q2 earnings results announced on August 17, TJX Companies, Inc. (NYSE:TJX) EPS was valued at $0.69, surpassing estimates by $0.02, and its revenue came in at $11.84 billion, missing estimates by $211.22 million. TJX Companies Inc (NYSE: TJX) has maintained a healthy gross profit margin of 35% based on trailing twelve months’ data. The stock has gained a 5.17% value in the past 6 months as compared to S&P 500 return of -2.42% during the same period. As of June 30, Alkeon Capital Management is the largest shareholder of TJX, holding 5.708 million shares worth roughly $319 million.
ClearBridge Investments published its “Large Cap Value Strategy” fourth quarter 2021 investor letter. In its Q4 2021 investor letter, it mentioned The TJX Companies, Inc. (NYSE:TJX) and discussed its stance on the firm. Here is what the fund had to say;
“The pandemic created opportunities for us to be more aggressive in a variety of areas of the market. We were opportunistic throughout the year, for example, in positioning the portfolio to benefit from a flush consumer eager to return to spending and traveling. New positions included TJX, an off-brand retailer with a large presence in the U.S. and Europe that should continue to benefit from the contraction of many traditional retailers, particularly as consumer spending resumes.”
09. Lululemon Athletica Inc. (NASDAQ:LULU)
Number of Hedge Fund Holders: 50
Total Value of Hedge Fund Holdings: $1,266 Million
Lululemon Athletica Inc.’s popularity was at its peak among the hedge funds during Q2 2019 and it has somewhat maintained the same position as the popularity graph is down only marginally by 11% as of Q2 2022. The stock has gained a 6.38% value in the past 6 months as compared to S&P 500 return of -2.42% during the same period.
One of the main reasons to own Lululemon Athletica Inc. (NASDAQ:LULU) shares is that Lululemon combines expansion with a well-established business. Since its founding, Lululemon has kept to its word and had tremendous sales growth, increasing sales by double digits over the past nine years. What’s even more surprising is that Lululemon managed to increase annual revenue by 11% YoY even at the height of the COVID-19 pandemic, which sent several businesses into bankruptcy. This was made possible by the company’s omnichannel strength, digital adoption, and strong brand.
By the end of the second quarter of 2022, 50 hedge funds out of the 895 tracked by Insider Monkey held stakes in Lululemon Athletica Inc. (NASDAQ:LULU), worth roughly $1,266 million. This is compared to the previous quarter’s 44 hedge fund holders with a total stake value of roughly $763 million.
08. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 51
Total Value of Hedge Fund Holdings: $2,367 Million
Number eight in our list of ten best retail stocks is Dollar General Corporation (NYSE: DG). On August 5, Truist analyst Scot Ciccarelli increased his price target on the stock from $227 to $262 and maintained a Hold rating on the shares. The analyst informs investors in a research note that Truist credit card data indicates that sales trends would “meaningfully” exceed the previous in-line projections. He also raises his Q2 comps forecast to 7% from 3%. Consumers may start using the Dollar General channel sooner than they did during the 2007–2008 recession, says Ciccarelli.
By the end of the second quarter of 2022, 51 hedge funds out of the 895 tracked by Insider Monkey held stakes in Dollar General Corporation (NYSE: DG), worth roughly $2,367 million. This is compared to the previous quarter’s 53 hedge fund holders with a total stake value of roughly $2,251 million.
07. Ulta Beauty, Inc. (NASDAQ:ULTA)
Number of Hedge Fund Holders: 52
Total Value of Hedge Fund Holdings: $1,730 Million
Ulta Beauty, Inc. (NASDAQ:ULTA) stock hit the peak of its popularity among hedge funds tracked by Insider Monkey during Q2 2019 and it has maintained that position as the popularity graph dip only by 9% as of Q2 2022. It stands at number seven on our list of ten best retail stocks to buy now.
On August 16, prior to the release of Ulta Beauty’s Q2 earnings report (to be announced on August 25), UBS analyst Michael Lasser maintained his Buy rating and $500 price target for the stock. The company is expected to report “strong” earnings, and although worries have emerged about a slowdown in sales growth, the analyst cautions investors in a research note that these worries may have been embedded into expectations.
By the end of the second quarter of 2022, 52 hedge funds out of the 895 tracked by Insider Monkey held stakes in Ulta Beauty, Inc. (NASDAQ:ULTA), worth roughly $1,730 million. This is compared to the previous quarter’s 48 hedge fund holders with a total stake value of roughly $1,143 million.
06. Builders FirstSource, Inc. (NASDAQ:BLDR)
Number of Hedge Fund Holders: 53
Total Value of Hedge Fund Holdings: $1,384 Million
Builders FirstSource, Inc. (NASDAQ:BLDR) popularity among hedge funds went to its peak during Q2 2021 and the situation is no different after a year as the graph is only down marginally by 12%. It stands at number seven on our list of ten best retail stocks to buy now.
Builders FirstSource, Inc. (NASDAQ:BLDR) has outperformed earnings forecasts in Q2 despite the stock market’s doom and worries about the housing industry in the first half of the year. The company reported strong second-quarter performance despite challenges from the macroeconomic environment and a sluggish industry, beating EPS GAAP actual estimate by $2.62 and revenue estimate by $1.37 billion. This demonstrates the success of BLDR’s expansion plan. Builders FirstSource has invested over $230 million in M&A so far this year, and the management anticipates spending at least $500 million in the sector by 2022. The housing market is anticipated to hold up even in a downturn without collapsing, and BLDR’s outstanding operational performance and M&A strategy will pay off in the long run.
By the end of the second quarter of 2022, 53 hedge funds out of the 895 tracked by Insider Monkey held stakes in Builders FirstSource, Inc. (NASDAQ:BLDR), worth roughly $1,384 million. This is compared to the previous quarter’s 57 hedge fund holders with a total stake value of roughly $1,871 million.
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Disclosure: None. 10 Best Retail Stocks To Buy Now is originally published at Insider Monkey.
