In this article, we discuss Michael Burry’s latest warning on the bullwhip effect and 5 retail stocks to watch. If you want to read about some more retail stocks to watch, go directly to Michael Burry’s Latest Warning on Bullwhip Effect and 10 Retail Stocks to Watch.
5. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 50
Target Corporation (NYSE:TGT) is a general merchandise retailer. The firm recently announced that it would take “additional markdowns to remove excess inventory and cancel orders” as it seeks to create additional flexibility. However, the firm also said it would take pricing actions amid unusually high transportation and fuel costs. The firm expects the operating margin rate to fall to around 2.0% for the second quarter in light of these measures against consensus estimates of 6.5%. It hopes to have the rate up to 6% before the end of the year.
On June 10, Credit Suisse analyst Robert Moskow maintained an Outperform rating on Target Corporation (NYSE:TGT) stock with a price target of $180, noting the firm was focusing on “getting through the unwanted inventory resulting from consumers shifting their spending”.
Among the hedge funds being tracked by Insider Monkey, Boston-based Arrowstreet Capital is a leading shareholder in Target Corporation (NYSE:TGT), with 2.5 million shares worth more than $530 million.
In its Q2 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Target Corporation (NYSE:TGT) was one of them. Here is what the fund said:
“We added Target Corporation (NYSE:TGT) to our consumer staples sector. Target Corporation (NYSE:TGT) offers a broad array of products in owned and known brand items at affordable prices. Its omni-channel fulfilment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target Corporation (NYSE:TGT) is an attractive holding.”
4. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 60
Walmart Inc. (NYSE:WMT) owns and runs a chain of hypermarkets. On June 16, the company announced that it would be partnering with streaming service Roku in a first-of-a-kind partnership that would enable the retail firm to sell products directly through television streaming. The collaboration would offer streaming customers product discovery and a seamless checkout at the point of engagement. OneView, the ad platform of Roku, will oversee the development of shoppable ads in this regard.
On June 27, Goldman Sachs analyst Kate McShane maintained a Buy rating on Walmart Inc. (NYSE:WMT) stock and lowered the price target to $138 from $160, decreasing the earnings estimates for the firm by 2% on a lower margin outlook.
Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm GQG Partners is a leading shareholder in Walmart Inc. (NYSE:WMT), with 15.4 million shares worth more than $2.2 billion.
3. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 61
Costco Wholesale Corporation (NASDAQ:COST) owns and runs membership warehouses. Wells Fargo analysts claim that the “membership trends have been excellent” for the company despite macro factors and general retail weakness. It also has the best overall renewal rates and the customers seem to be holding up well for the firm. The inventory position of the firm also seems “relatively good” and the management seems confident the firm can navigate the inflationary backdrop.
On June 2, Jefferies analyst Corey Tarlowe maintained a Buy rating on Costco Wholesale Corporation (NASDAQ:COST) stock and increased the price target to $580 from $560, noting that data indicated the firm had an “opportunity to raise membership prices”.
At the end of the first quarter of 2022, 61 hedge funds in the database of Insider Monkey held stakes worth $5.41 billion in Costco Wholesale Corporation (NASDAQ:COST), up from 57 in the preceding quarter worth $5.40 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Costco Wholesale Corporation (NASDAQ:COST) was one of them. Here is what the fund said:
“Portfolio gains were led by a diverse group of contributors. Also in consumer discretionary, Costco Wholesale Corporation (NASDAQ:COST), which operates a chain of membership-only big-box retail stores, continues to impress as it takes to share and becomes more relevant for the consumer even as the world opens up.”
2. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 65
Lowe’s Companies, Inc. (NYSE:LOW) is a home improvement retailer. On June 21, the company announced that it would be building more than 500 3D product assets in a push into the metaverse. The assets, available for free via the Open Builder platform of the company, will include lighting, patio furniture, area rugs, and kitchen and bath accessories. The firm expects consumers to soon walk through a planned home improvement setup in the metaverse to better visualize ideas.
On June 22, MKM Partners analyst David Bellinger initiated coverage of Lowe’s Companies, Inc. (NYSE:LOW) stock with a Neutral rating and a price target of $190, noting that “rate headwinds appear to be building” for the firm.
At the end of the first quarter of 2022, 65 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in Lowe’s Companies, Inc. (NYSE:LOW), compared to 72 in the preceding quarter worth $6.8 billion.
In its Q4 2021 investor letter, Pershing Square Capital Management, an asset management firm, highlighted a few stocks and Lowe’s Companies, Inc. (NYSE:LOW) was one of them. Here is what the fund said:
“Lowe’s Companies, Inc. (NYSE:LOW) is a high-quality business with significant long-term earnings growth potential
Supportive macroeconomic backdrop
-Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog
-COVID-19 causing millennials to enter the housing market
Positioned to grow EPS largely independent of market conditions
-Idiosyncratic revenue opportunities driving share gains
-Self-help initiatives catalyzing operating margin expansion
-Buybacks representing ~8% of current market capitalization planned for 2022
Multi-year business transformation with substantial earnings upside
-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing
-Potential to generate high-teens EPS growth over the next several years.
Lowe’s Companies, Inc. (NYSE:LOW) continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher prospective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ:AMZN) is a diversified technology firm with core interests in e-commerce. On June 14, the company announced that it would begin the delivery of orders through the much-awaited PrimeAir drones later this year. Only three firms in the US presently have certification for drone deliveries. Per Amazon, the service will initially only be available in Lockeford, in California. Google and Walmart are the other two firms that are planning to compete with Amazon in this space.
On June 29, JPMorgan analyst Doug Anmuth maintained an Overweight rating on Amazon.com, Inc. (NASDAQ:AMZN) stock and lowered the price target to $175 from $200, identifying “macro pressures, currency moves and company-specific dynamics” as some of the reasons behind the target decrease.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ:AMZN), with 4 million shares worth more than $13 billion.
In its Q1 2022 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN) stock was down modestly in the quarter, but opportunistic purchases helped the position contribute positively to the Fund. Our index short positions against ETFs tracking market indexes provided helpful ballast during the first quarter drawdown but were otherwise detractors for the fiscal year. During the quarter, we covered roughly 20% of our S&P 500 short and 50% of our Nasdaq 100 short at progressively lower prices. Among our long equities, we added materially to high-conviction holdings Amazon.com, Inc. (NASDAQ:AMZN).”
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