As clearly evidenced by the recent underperformance of many retail stocks, retail is not a great place to be right now. Macy’s (M) missed earnings this quarter as aggressive promotions took their toll on margins causing the department store retailer to cut guidance. The company over-ordered inventory expecting a big Q2 rebound in sales from Q1, but that never materialized.
If you listen to the economists, Macy’s shouldn’t be having these troubles. But according to Macy’s CEO Terry Lundgren, customers are still not feeling comfortable about spending more in an uncertain economic environment. And Macy’s isn’t the only one experiencing weak sales. Even non-brick and mortar retailer Amazon (AMZN) continues to lose money. U.S. Retail sales in July were flat, posting the weakest reading since January.
I am avoiding the U.S. consumer stocks. Even the restaurant group is weak, with McDonald’s (MCD) trading down for the year. The consumer is not exactly fat, happy, and healthy right now. The Fed-driven economic expansion may have been good for investors over the last few years, but now the Fed is done.
So I am looking for better opportunities overseas. China and India have been severe underperformers the last few years relative to the U.S. markets. While the U.S. has been averaged 14-15% over the last 5 years, those markets were up only 1-3%. Now China and India seem almost immune from geopolitical tensions in Russia, Iraq, and Gaza and are doing quite well.
One of the areas I really like right now is China. One of the stocks I currently own is a Chinese online travel booking website called Ctrip.com (CTRP). Ctrip offers hotel reservations, airline tickets and packaged tours to business and leisure travelers in China. Ctrip primarily targets individual travelers as opposed to those traveling in groups. The company was founded in 1999 and is based in Shanghai, and listed on the NASDAQ in 2003.
Data from Best Stocks Now app
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