Do you own any stock of something in the retail sector? Maybe you own the current market cap retail leader, Amazon, but you want to get into something else in this sector for a good price? Well, look no further because Macy’s stock has been hammered recently after a long trek upwards starting from the end of 2008 before plummeting in the summer of 2015.
I love buying stocks that have great brands, a strong image, and good business practices. Especially when they’re at a discount and everyone else is running away. A lot of the time this turns out to be a great time to buy if there isn’t any danger signs that the stock is going to continue bleeding. For me, Macy’s fits that bill perfectly.
Who are Macy’s true competitors?
First take a look at Macy’s competitors. Although Amazon is in the same retail sector I wouldn’t call them direct competitors because of the way people still like to go into a store and try on clothes before you buy it. Amazon is, however, a competitor of Macy’s just not as much so as something like JC Penney, Kohl’s, Dillard’s and Belk. When I look at these competitors and just compare the company’s image and brand from the surface I always put Macy’s near the top of this list. Image alone shouldn’t be your reason to buy something though, so let me try and convince you further.
Macy’s closing stores
One of the things that Macy’s is doing to try and get ahead of it all is to close down some of its underperforming brick and mortar stores. This can seem like a bad thing when looking at it from one perspective, and that’s completely true, but Macy’s is doing it selectively and strategically. Even though Macy’s is suffering from a decline in revenue growth over the past few quarters it is actually doing much better and growing in a different metric, ROE.
An increasing ROE means that Macy’s knows what to do with their money. So should expect your invested money into this stock to be used wisely. Just as a refresher, ROE (Return on equity) can be defined as the amount of net income that is returned as a percentage of the shareholders equity. What this means is that ROE will measure how much profit they make with the money us shareholder have invested into them. Needless to say, this is a good thing to have ticking upwards.
Buying when others are dumping
If you’re planning to buy Macy’s for the short term then this might not be the best play for you at this very moment because if you look at the graph for Macy’s and just at the technicals then you could assume that there will be more downside before we head back up. If you look at the graph in the long term then you could see some support in the 30’s range dating back to 2005. The stock stands in the mid 30s right now about 50% off its all time highs. However, I wouldn’t be surprised if it fell into the 20s where there should more more support that dates back to the 90s.
What am I going to do? I’m going to put in some limit order now in the mid 30s, and get a small stake in there while I can. Then I’ll watch and decide what to do later. If it drops into the 20s and I don’t see any real danger signs then I’ll likely add to my position at that point.
And oh yeah, in the mean time I’ll be making over a 4% dividend on my invested money while I wait. At these prices I think Macy’s is worth the “gamble.” I’m not quite all in yet, but I would never be all in with one buy into any stock anyways.