Want to Buy Consumer Services Stocks? Before buying Consumer Services stock, you should consider researching this sector's fundamentals and effectively compare the performance and earning potential of the different Consumer Services stocks, thus leading to smart and wiser investment decisions.
As consumers our buying is usually made of essential goods and services that we always buy because we need them and luxury goods and services, those “nice to have” perks that we only grab when we have extra disposable income to spend. The products and services included in the second category are classed under the consumer discretionary sector and in contrast to the consumer staples companies, the companies in the discretionary sector perform better during times of high economic growth, when people, in general, have more money to spend and are affected during recession times or times of crisis, such as the current pandemic. This is an interesting part of the stocks market and it is overviewed below so that interested investors may give it the attention it deserves when making their stock investment decisions.
Though many investors decide to buy retail stocks of the firms where they like to shop because they can afford to own a piece of those vendors, this is a very bad method to choose which retail stocks to buy, since offering a good shopping experience that you like, doesn’t necessarily make a retailer worthy of a spot in your investment portfolio.
The situation in the retail stock sector was greatly affected by the COVID-19 pandemic as this forced many brick and mortar retailers to either remain closed due to lockdowns or modify their operations and shift to e-commerce services. The pandemic has also crashed the demand for certain types of products while leading others to boom as consumer habits and needs to be changed during the crisis. With the gradual re-opening of economies around the world, the retail sector has gradually started its re-adjustment and it remains to be seen whether the pandemic will leave some permanent shifts and changes behind it.
Even against this complicated and uncertain backdrop, however, retail stocks include many top performers that merit a position in your investment portfolio. Below we shall be highlighting some of those, while also discussing how to effectively discern in which retail stocks you should be investing.
Several consumer discretionary companies stand out as being among the best in the business. Here are some prime examples:
As consumers have different and differing desires, the consumer discretionary stocks, i.e. the stocks of companies that sell “luxury” “nice to have” “non-essential” goods and services come from several different backgrounds and fields of economic activity. Examples of businesses classed under the discretionary stocks sector include:
In order to discern which retail stocks constitute good investment choices, interested investors should carefully study several key aspects of the retail business and take into account the performance of retail companies in reference to the following metrics:
The best retail companies are those which manage to grow their revenue obtained by the sale of their products or services in a consistent manner. In general, a good retailer to invest in is one that achieves a big percentage change in their total sales from year to year. Retailers may increase their sales by selling more at existing stores and vending points or by adding more sales points. Ideal retail to invest in would be one that can demonstrate strong sales at existing sales points, as well as robust overall growth in its sales.
A retailer may be making high sales and be generating revenue but still remain unprofitable, especially since many retailers often lower their prices and run promotions to boost sales, often losing money on each sale. The top retail companies, however, do not face such issues as they have loyal customers who are willing to pay premium prices. Investors should thus give preference to retailers who display a healthy growth in their earnings, both in terms of their absolute earnings values and their earnings per share.
Much of the retail business tends to be seasonal and concentrates around the end of year festive period. Retailers that achieve strong sales during this time may make up for weaker sales during other times of the year. This being said and depending on their target market, some retailers experience greater sales during other times as well, such as the back-to-school season or the summer holidays. You will need to study the sales trends to determine the extent to which a retailer is seasonal and keep in mind that those retailers that can manage to perform strongly at key seasons for their own market, usually manage to outcompete their competitors.
Retailers often have extensive real estate holdings as they often own the stores in their network and while maintaining those stores and improving them may often lead to shrinking profits, the spaces that retailers own or lease also have significant value, and this value may constitute a big portion of a retailer’s overall worth, especially if it owns stores in prime locations. Thus, when evaluating a retailer, investors should also look at the retailer’s real estate holdings, their value, and the efficiency in their usage.
Retail businesses that were in a weak financial state before the pandemic, were hit hard by declining sales and could no longer sustain the losses incurred, causing them to go bankrupt. Therefore, and with this in mind, investors should pay particular attention to the health of a retailer’s balance sheet and prefer those companies with plenty of available cash and no debts or at least low debts which are easily manageable.
In the past retailers either had physical stores or used online sales, nowadays and especially since the pandemic crisis, most companies have added to their brick and mortar shops, an e-commerce portal that they used during lockdown periods. The increased popularity and added convenience of e-commerce have often meant a faster growth for online sales than the overall growth of sales achieved. This reveals that as time goes by, retailers without a strong online presence will face difficulties in effectively competing with their rivals and investors should take this into account when evaluating which retailer to invest in.
If you choose retailers that do well in terms of business fundamentals, i.e. have low debts, healthy cash flows, and an edge over their competitors, then retail stocks may well be an ideal investment and a great opportunity to make money, especially since they also allow you to invest in a company you know and love and are a customer of.
The pandemic may well have created a good opportunity for those interested in investing in retail stocks and especially in the stocks of consumer discretionary companies. This because such stocks may be currently trading at discounted prices due to lower demand during the hype of the pandemic, but they are set to resurge soon as life returns to normality and demand starts to increase. In fact, top-notch retail companies may well return stronger in the post-covid era, since they can afford to invest more and are also able to capture the market share of competitors who have not managed to survive the crisis. In a nutshell, the long-term outlook seems positive, especially for patient investors who can buy and hold long.
There are several online sites and platforms where people from across the globe can buy Consumer Services at good exchange rates and with low or no transaction fees. To aid your quest we have comprised a list of some of the most popular methods and platforms to buy Consumer Services from and your strongly advised to consult this list before making your first purchase of or investment in Consumer Services.
There is no guarantee that you will make a profit when you invest in Consumer Services. However, to give yourself the best chance possible we have hand-picked the three most valuable such strategies, which you can find below:
In this guide, the aim wasn’t only to answer simple questions like “how to buy stocks of the Consumer Services sector?” or “where to buy Consumer Services stocks?”. Instead, the goal was to equip you with the relevant knowledge and insight to be able to see and understand the bigger picture as well as make your Consumer Services stocks investment journey as successful and as profitable as possible!