US retail: the shares that win when America hits the shops – Fidelity International

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Published 17 June 2022
Fidelity International

Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest.
US consumers have proven to be highly resilient over the years – even when the economic news looks dire the willingness of the average American to get out there and spend has remained.
It has meant the US economy has often recovered from set-backs more quickly than international counterparts, with companies serving those consumers driving those periods of recovery.
US retailers include some of the most famous chains in the world, and the sector today is incredibly diverse – from traditional stores to giants of e-commerce.
Even as other sectors of the US economy have struggled to contend with the rise of technology and a more globalised world, retail has proven its ability to adapt. That was true in the years following the financial crisis of 2008 and 2009, when the growth of share prices in the retail sector outpaced the wider S&P 500, and also in the period of the pandemic, when lockdown meant many consumers diverted their spending online leading to gains for investors in retail.
For ordinary investors, there are some great attractions to investing in retailer stocks. The first is familiarity. These are the companies serving people like us, and our spending habits affect their fortunes. We need only think about our own spending to have a good idea of how these companies might be doing. There’s more to successful investing than that, of course, but it’s a great insight to start from.
From a UK vantage point it may not be possible to assess first-hand the footfall in our local branch of Home Depot or Target, but we can check out their online offerings for signs that they are giving their customers what they want. They are also some of the most-widely covered companies in the world, with up-to-date analysis of their results easy to find.
Many professional investors are big fans as well. James Thomson, manager of the Rathbone Global Opportunities Fund, holds a large position in Costco, the membership-only retailer that has proven that consumers are still willing to visit big-box stores to grab a bargain.
Other stars of US retail include Amazon, the all-conquering tech giant that is competing to be the biggest company in the world thanks to its unrivalled logistics network for home delivery and state-of-the art of data to serve up items to customers who want to buy them.
Amazon share price chart
Source: Refinitiv from 10.6.17 to 10.6.22. Basis: Share price in USD. Excludes initial charge.
Walmart is the largest traditional retailer in the world by size but has struggled more recently as competition from online sellers has risen. A healthy dividend has helped reassure investors while its stake in the discount store space could make it a winner if there is a more pronounced downturn in the economy.
And the future is likely to bring more global retail names to the US. Chinese low-cost fashion phenomenon Shein is mulling a listing in New York with a huge $100bn valuation.
Five year performance
Past performance is not a reliable indicator of future returns
Source: Refinitiv from 31.5.17 to 31.5.22. Basis: Share price returns in USD. Excludes initial charge.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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