Eva Ados, COO and Chief Investment Strategist at ERShares, recently appeared on CNBC’s Power Lunch–Trading Nation to discuss investment decisions amid the market fluctuations. With the market focus on Fed taper timing, specific sectors are reaping the benefits more than others.
Top Retail Stocks
She highlights brick-and-mortar furniture chain Restoration Hardware (NYSE: RH) and e-commerce store Etsy (NASDAQ: ETSY) as retail stock standouts ahead of the holiday season.
“In a market where retail companies have shown artificial growth over the last year, on YOY comparisons, these two companies had good growth last year,” Ados said during the interview. With the risk factors that contribute to the rising interest rates at hand, Ados finds favorable opportunities in certain sectors.
Retail companies like Etsy consist of a two-sided marketplace with local buyer and seller divisions, driven strictly by the e-commerce system. Therefore, Etsy is better immune to supply chain disruptions, an ongoing global issue reverberating across large companies widely. Not to mention, supply chain issues persist at the forefront for RH. However, the increased consumer spending remains bullish as the home-renovation boom carries forward.
“Their growth now of 91% for Etsy and 38% for RH is sustainable. It shows a signal that these companies can continue growing.” Ados remains optimistic about the strong sales growth coupled with a healthy profit. It is also evident that these retail companies maintain compelling performance with their business models, fundamentally entrepreneurial driven, despite the surge in COVID cases.
“Etsy has a 22.5% income margin, and that’s 20 times higher than the industry average of 1.5%, which is extraordinary. And then in the case of RH, the EBITDA has doubled in the last three years,” she said. Etsy and RH have had a mixed quarter- Etsy has beat the S&P 500, while RH has traded roughly in line with the benchmark index.
Ados recommends investors to seek out opportunities in specific sectors uniquely positioned to benefit as the inflationary trend becomes more marked in the Fourth Quarter.
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Credit to CNBC Trading Nation
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