Author: The MarketClub Team

3 Consumer Stocks For Your Watchlist

Posted on by The MarketClub Team

Despite inflation moderating slightly for October, the Fed doesn’t seem to be in the mood to pause the interest rate hike just yet. The continued rate hikes might bring further pain for businesses showing signs of a slowdown, with the cut in earnings estimates.

Since the market volatility is unlikely to catch a break anytime soon, shares of fundamentally strong, consumption-driven businesses, with demand and margins immune to an economic slowdown, seem ideal investments for potential upsides while ensuring adequate downside protection.

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Hence, it would be opportune to add BJ's Wholesale Club Holdings, Inc. (BJ), Casey's General Stores, Inc. (CASY), and Lifeway Foods, Inc. (LWAY) as some technical indicators point to sustained upsides in them amid prevailing uncertainties.

BJ's Wholesale Club Holdings, Inc. (BJ)

BJ operates majorly on the east coast of the United States as a warehouse club operator. The company offers a curated assortment of perishables and other grocery products, general merchandise, gasoline, and other ancillary services.

Over the last three years, BJ’s revenues grew at an 11.6% CAGR, while its EBITDA grew at an 18.7% CAGR. The company’s net income grew at a 32.6% CAGR during the same period.

For the fiscal 2022 second quarter, ended July 30, 2022, BJ’s revenue increased 22.2% year-over-year to $5.10 billion, driven primarily by higher gasoline sales. During the same period, the company’s income from continuing operations and adjusted EBITDA increased 27% and 24.3% year-over-year to $141.01 million and $273.7 million, respectively.

BJ’s adjusted net income for the quarter came in at $144.30 million or $1.06 per share, up 27.3% and 29.3% year-over-year, respectively.

Analysts expect BJ’s revenue and EPS for the fiscal year ending January 2023 to increase 14.8% and 11% year-over-year to $19.13 billion and $3.61, respectively. Both metrics are expected to keep growing over the next two fiscals. Moreover, the company has impressed by surpassing consensus EPS estimates in each of the trailing four fiscals. Continue reading "3 Consumer Stocks For Your Watchlist" →

No-Brainer Stock For A Hawkish Fed

Posted on by The MarketClub Team

The multi-decade high inflation has kept the stock market under pressure since the beginning of the year. The Federal Reserve has been busy trying to tame persistent inflation through aggressive interest rate hikes.

After raising the benchmark interest rate six times this year, Fed Chairman Jerome Powell has cautioned that the final level of interest rates would be higher than expected.

Despite the overall macroeconomic uncertainty, leading foodservice retailer McDonald's Corporation (MCD) reported impressive financials for the third quarter ended September 30, 2022. The company operates and franchises McDonald’s restaurants with nearly 40,000 locations in over 100 countries.

MCD beat the consensus EPS and revenue estimates in the last reported quarter. Its EPS and revenue were 3.9% and 3% above analyst estimates, respectively. The company’s global comparable sales rose 9.5% year-over-year, while the U.S. comparable sales increased 6.1%. According to Placer.ai., visits to the Chicago-based chain’s U.S. restaurants rose 6.2% in September, compared to the traffic to the quick-service restaurant space rising just 0.8%.

The company’s impressive comparable sales and profit were supported by higher menu prices and increased restaurant traffic. Surging commodity and labor costs led to the company raising the prices of its burgers and fries, but customers flocked to the fast-food chain for its value meals.

MCD Chief Financial Officer Ian Borden said, “We’re gaining share right now among low-income consumers” in the United States. Borden expects the company to ride out the expected recession next year by relying on digital orders and delivery.

MCD’s President and CEO Chris Kempczinski said, “Our third quarter 2022 performance demonstrated broad-based business momentum as global comparable sales increased nearly 10%. I remain confident in our Accelerating the Arches strategy as our teams around the world continue to execute at a high level.”

“As the macroeconomic landscape continues to evolve and uncertainties persist, we are operating from a position of competitive strength. I also want to thank our franchisees, who have done a tremendous job navigating this environment, while providing great value to our customers,” he added.

MCD’s strong fundamentals allowed it to raise dividends for 46 consecutive years. Its dividend payouts have increased at a 6% CAGR over the past three years and an 8% CAGR over the past five years. Its current dividend yield is 2.27%, while its four-year average yield is 2.27%.

The stock has declined 0.1% in price year-to-date, while it has gained 5.9% over the past year to close the last trading session at $267.84. Continue reading "No-Brainer Stock For A Hawkish Fed" →

3 Stocks To Benefit from the Recent Rate Hike

Posted on by The MarketClub Team

High inflation has been a problem for the economy this year. Although the consumer price index (CPI) eased slightly in October, it remains way above the Fed’s 2% long-term target.

The Federal Reserve has been trying to combat runaway inflation by draining liquidity from the financial system by hiking the benchmark interest rates and selling off a significant part of its bond portfolio.

The Fed has raised the benchmark interest rate six times this year, with the fourth consecutive 75 basis point rate hike taking the target range to 3.75%-4%.

Bankrate’s chief financial analyst Greg McBride said, “A fourth consecutive rate hike of 0.75 percent – after going 28 years without one that large – speaks to the urgency of the Fed’s task.” “They’re still playing catch-up against inflation that continues to run near 40-year highs,” he added.

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Concerns over rising borrowing costs have led to volatility in the stock market. However, not all sectors suffer from rising interest rates. Financial institutions, including banks, usually benefit from rising interest rates as it helps them expand their interest income.

Therefore, it could be wise to make the most of the strong uptrend in bank stocks JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), and The Goldman Sachs Group, Inc. (GS). Continue reading "3 Stocks To Benefit from the Recent Rate Hike" →

1 Retail Stock To Avoid This Holiday Season

Posted on by The MarketClub Team

Shares of sporting goods retailer DICK’S Sporting Goods, Inc. (DKS) have declined 24.4% over the past year and 11.2% year-to-date. However, it has gained 4.2% over the past three months to close the last trading session at $102.17.

DKS Chart

Source: MarketClub

Recently DKS announced the launch of DSG Ventures, a $50 million in-house fund to invest in innovative sports-related companies like itself.

Ed Stack, DKS’ Executive Chairman, said, “DSG Ventures will enable us to give back and help support entrepreneurs achieve their dreams through our connections, experience, and support. We know that DSG Ventures (and our partners) will bring innovative products, services, and experiences to athletes worldwide.”

However, the macroeconomic headwinds could mar DKS’ business growth. Amid the sky-high inflation and rising recession possibilities, consumers are hesitant to spend on discretionary items even before the holiday season.

Leo Feler, the chief economist at market researcher Numerator, said, “It's food, it's medical care, it's housing and shelter costs. It's essential services such as veterinary care, and child care. All of these things come first before consumers buy holiday gifts."

Furthermore, U.S. holiday sales are expected to rise at a slower pace this year. The National Retail Federation (NRF) forecast holiday sales, including e-commerce, to rise between 6% and 8% compared to a 13.5% jump last year and a 9.3% increase in 2020 when supply chain issues and pandemic-related uncertainties weighed on.

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Continue reading "1 Retail Stock To Avoid This Holiday Season" →

1 Stock You Should Think Twice About Buying

Posted on by The MarketClub Team

E-commerce and tech giant Amazon.com, Inc. (AMZN) guided a slowdown in sales growth for the holiday season, making investors anxious. The company expects net sales between $140 billion and $148 billion for the year's final quarter, below analysts’ expectations, representing a year-over-year improvement of as little as 2%.

“We are seeing signs all around that, again, people’s budgets are tight, inflation is still high, energy costs are an additional layer on top of that caused by other issues,” Amazon Chief Financial Officer Brian Olsavsky said. “We are preparing for what could be a slower growth period, like most companies,” he added.

AMZN’s shares plunged substantially following the gloomy forecast and are hovering around its 52-week low. The stock has slumped 46% year-to-date to the last trading session at $89.98, well below its 50-day and 200-day moving averages of $116.72 and $130.19, respectively.

AMZN Chart

Source: MarketClub

AMZN’s market cap recently slipped below $1 trillion.

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AMZN has been trying to navigate the macroeconomic headwinds and hosted two cornerstone sales events in a year: Prime Day in July and the Prime Early Access Sale last month. Continue reading "1 Stock You Should Think Twice About Buying" →