5 Undervalued Cyclical Stocks for 2021

1. The TJX Companies, Inc. (NYSE: TJX)

Number of Hedge Fund Holders: 68

The TJX Companies, Inc. (NYSE: TJX) is a Framingham-based multinational company that sells clothing. The famous brand names for the firm include Marmaxx, HomeGoods, TJX Canada, and TJX International. It operates more than 3,500 stores in the US and thousands more across the world, primarily in Australia and Canada. The company was founded in 1956 and is placed first on our list of 12 undervalued cyclical stocks for 2021.

The TJX Companies, Inc. (NYSE: TJX) is one of the biggest retailers that could expect a strong comeback from the reopening of markets and stores as the vaccine rollout allows people to venture out in public spaces. On March 30, the company declared a quarterly dividend of $0.26 per share, in line with previous estimates. 

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Alkeon Capital Management is a leading shareholder in the firm with 6 million shares worth more than $416 million.

Giverny Capital, in their Q1 2021 investor letter, mentioned The TJX Companies, Inc. (NYSE: TJX). Here is what Giverny Capital has to say about The TJX Companies, Inc. in their Q1 2021 investor letter:

“We’re pretty happy with the current portfolio and so were not very active during the quarter. Our only consequential decision in the first quarter was to exit the off-price retailer The TJX Companies in January. My prior firm owned TJX for most of the past 20 years and enjoyed appreciation on the order of 20 times the original purchase price.

TJX is a great company, but the growth rate has slowed in recent years and the operating margin has been under pressure, mainly from rising wages for store workers. When the pandemic hit, I bought the stock for GCAM in the belief that if the US fell into a prolonged recession, TJX would be a winner because of its extreme value position.

The US didn’t fall into a prolonged recession. Rather, many consumers are flush with cash thanks to government relief programs. But brick-and-mortar stores are losing out to online competitors for reasons of safety and convenience. TJX has fared much better than most of its competitors during this time and should continue to do so, thanks to its model of buying inventory close to need and reacting to what is happening in the marketplace rather than trying to create hot product. But the stock rose about 50% in the few months we owned it and that increase seemed to price in a complete recovery and more. We sold in early January.”

You can also take a peek at 10 Best Travel Stocks to Buy Right Now, and 10 Best Automotive Stocks to Invest in Now.

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