When will the next market decline happen? It’s not an enjoyable topic to think about, but it is always a good idea to be ready. Even in good times, being prepared can help you maintain your cool and make the greatest selections for your portfolio.
No one knows when the next financial catastrophe will strike. But if it happens, now is a good time to buy shares in firms with potential for future growth that might fall at the time, but have everything it takes to rebound later. These are enterprises with solid present and future prospects in the field of consumer products. The following top retail stocks are on my list in the world of consumer goods.
During the worst days of the Covid pandemic, one of the winning businesses was Target (TGT 1.13%). There are a few reasons for this. And each one of these factors should help Target succeed in future difficult situations. Target has created a variety of drop and collection options. The company’s digital and in-store operations are closely linked; over 95% of Target’s sales are completed by its stores.
Target has adapted its store sizes and product lines to the area, according to a recent Business Insider article. To invigorate long-term development, the firm has committed to invest up to $5 billion this year in areas that will benefit from future growth. It will be investing in physical and digital store experiences, fulfillment, and also the supply chain.
Target has already seen the benefits. Its ROIC is increasing steadily. And, despite investments in the company, Target was able to reach a new high for fourth-quarter EPS under generally accepted accounting standards (GAAP) of $3.21. Target generated more than $100 billion in sales during the full year. That represents a growth rate of more than 35% over two years. Importantly, online and physical retail sales are exploding. Digital revenue increased by almost $13 billion from 2019 through last year. In that time, physical store transactions increased by $14 billion.
Target’s stock is up 10 percent year-to-date. All of these components together give me faith in Target’s ability to ride out a market downturn and increase earnings over the long term.
Amazon (AMZN 5.73%) experienced a 9% increase in revenue and a 7% boost in earnings during the pandemic. In fact, Amazon nearly doubled its fulfillment network in only two years to keep up with demand. And since then, Amazon has increased both annual income and net profit.
However, recent market conditions have had a significant impact on Amazon’s earnings. Recently, external elements have had an adverse influence on Amazon’s earnings, such as supply chain difficulties and inflation. The company also disappointed shareholders by reporting a net loss in the first quarter.
So, why would I buy Amazon stock in a bear market? There are two reasons for that. First, the e-commerce sector offers one of the company’s primary revenue drivers, which will lead to rising revenue over time. And it’s due to its Prime membership service. That program has over 200 million members worldwide as of 2020. And it is expanding. Recently, Amazon made a good decision: It raised its Prime membership fee in the United States. Once Amazon has dealt with today’s headwinds, I expect Prime to help reinstate income growth rates.
Here’s my second incentive to buy the stock: Amazon Web Services (AWS) is still thriving. By this, I mean sales and income growth of more than 10%. Sales and operating income increased 18.4% and 6.5%, respectively, in the first quarter. Importantly, AWS accounts for a large percentage of Amazon’s total operating earnings. As a result, AWS is an important part of the Amazon narrative.
Even if Amazon’s stock plummets during a future market downturn, earnings and share price momentum are likely to recover, as long as it is able to meet consumer expectations.