We recently published a list of 10 Best Retail Stocks To Invest In. In this article, we are going to take a look at where Albertsons Companies, Inc. (NYSE:ACI) stands against the other best retail stocks to invest in.
What Does the Holiday Shopping Season Look Like?
On December 2, Lindsey Bell, Chief Strategist at 248 Ventures, appeared on CNBC to discuss the consumer and economy in the holiday shopping season and the impact of proposed tariffs and the strong dollar on earnings. She said that the economy will see a resilient consumer, economy, and marketplace this week and at the end of the year. Bell expressed optimism going into the end of the year and was of the view that there is opportunity in retail at the present after staying in the shadows as a forgotten area.
As consumers have shifted in how they spend money and what they spend it on over the last several years, the retail sector is starting to see a comeback to discretionary items. Although an opportunity exists, retailers can only avail of it if they have the right merchandise at the right price or offer the right experience for the consumer. This is because the consumer is still value-oriented and price-sensitive simultaneously.
Tariff Threats: Are They Real for Investors and Consumers?
Concerns are circulating in the retail industry about the potential effects of “tariff threats” on the economy. Bell was of the view that it is undoubtedly necessary to stay on top of the potential threats that the president-elect’s proposed tariffs might cause to the markets.
However, she took us back to Trump’s first term as a president and the tariff increases he made, that Joe Biden continued in his term, highlighting that there wasn’t a significant lasting inflationary impact to them. She explained how tariffs work, saying that they go up when put on and have an impact in the near term, but eventually subside over time. The markets saw that in 2018 and 2019, while real inflation came in 2021 and 2022 with the pandemic. She reiterated that although the tariffs are something we need to keep an eye on, the scenario is not something we need to worry about from a consumer perspective this holiday shopping season.
Although the tariffs may not pose threats to consumers, what do they mean for investors? With the dollar up by half a percent at the time of the interview, concerns are rising about the dollar’s possible strength going into the next earnings season and the possible impact on rates that these “tariff threats” might bring about.
Bell agreed that the dollar’s strength impacts the earnings season, as about 50% of the S&P 500 gets its revenues from overseas multinational companies. She said that the dollar’s strength can continue into the year ahead, but this is a relative game. It is important to consider the currency and the strength of the economy around the world, as a strong dollar does depict a strong economy here in the US.
Our Methodology
For this article, we used the Finviz stock screener to identify around 40 retail stocks and narrowed our list to 10 stocks with the highest number of hedge fund holders, as of fiscal Q3 2024. We sourced the hedge fund data from Insider Monkey’s database. The stocks are arranged in ascending order of the number of hedge funds that have stakes in them.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Albertsons Companies, Inc. (NYSE:ACI)
Number of Hedge Fund Holders: 58
Albertsons Companies, Inc. (NYSE:ACI) is a US-based food and drug retailer. It has over 2,269 stores across 34 states and the District of Columbia under 20 banners, including Star Market, Shaw’s, Albertsons, Kings Food Markets, United Supermarkets, Haggen, Kings Food Markets, Acme, Carrs, and more.
The company experienced substantial growth in its pharmacy operations and digital sales in fiscal Q2 2024, primarily attributed to investments in its Customers for Life strategy. Albertsons Companies, Inc. (NYSE:ACI) also drove solid year-over-year growth in its omnichannel shoppers and loyalty members, along with accelerated growth in its Albertsons Media Collective.
Although the company has new and ongoing productivity initiatives, its operations are expected to see headwinds continuing into the balance of fiscal 2024. These headwinds are likely to be related to investments in associate wages and benefits, an increasingly competitive backdrop, and an increasing mix of its pharmacy and digital businesses, which carry lower margins.
Net sales and other revenue for the company was $18.6 billion in fiscal Q2 2024, compared to $18.2 billion in fiscal Q2 2023. This increase was driven by a 2.5% growth in identical sales, with strong growth in pharmacy sales driving the identical sales increase. Alberston Companies Inc.’s (NYSE:ACI) digital sales grew by 24% during fiscal Q2 2024.
Overall, ACI ranks 4th on our list of best retail stocks to invest in. While we acknowledge the potential of retail stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ACI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
