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Once upon a time, in a land that now seems far, far away, a phenomenon known as conspicuous consumption ruled the day.
Tank-like trucks called Hummers popped up in the most peculiar places, including deep in the city and far-reaching suburbs where eight miles a gallon doesn't get you very far.
Home owners with little equity or cash savings jumped at the chance to upgrade to stainless steel appliances and granite countertops to lull themselves and the neighbors into the impression of a heightened existance.
And what about $400 purses, $200 pairs of jeans and $80 tissues tees from the latest high-fashion, designer boutique?
By late 2006, conspicuous consumption had once again become part of the cultural fabric of America, as homeowners and investors buzzed from the high of sky rocketing real estate and asset values.
Back To Reality
But the great financial implosion of 2008 brought a very harsh ending to the madness, snapping consumers back to a reality where consumption is graded against affordability. And with unemployment remaining at high levels and bucket loads of uncertainty about the direction of the domestic and global economy, that dynamic doesn't appear ready to change any time soon.
So what's the upside?
Value is the New Cool
Discount shopping has become the new cool, helping value-oriented retailers score huge gains as bargain-hungry shoppers cut corners to boost the bottom line. Conspicuous consumption is so yesterday.
So why not align your portfolio with the trend and give yourself a chance to boost your returns? Below is a list of 3 extreme-value retailers that are gaining on the change in sentiment.
3 Extreme-Value Retailers
Dollar Tree, Inc. (DLTR - Snapshot Report) operates discount stores that sell items for less than $1 and has a market cap of $5.2 billion.
This Zacks #1 rank stock has been surging for the last few weeks after reporting better than expected Q4 results in late February that included sales gains of 12% and a 6% earnings surprise. The company has been a consistent producer over the last year, with an average surprise of 13%. Management recently announced a $200 million share buyback, sending shares 5% higher on the day. With a forward P/E of 14X, a nice discount to the overall market, and a next-year estimate projecting 14% earnings growth, DLTR looks well positioned for more gains. Take a look at the chart below.
Big Lots Inc. (BIG - Analyst Report), through its subsidiaries, operates as a broad line closeout retailer in the United States and has a market cap of $3.05 billion.
Big Lots has also been posting big gains in the weak consumer environment, with shares recently hitting a new 52-week high at $37.95 on rising estimates and a compelling valuation. The current-year estimate is up 12 cents in the last month to $2.73, meaning this Zacks #2 rank stock has a forward P/E multiple of 13.5X, a discount to the overall market. The next-year estimate is bullish, projecting 14% earnings growth. Take a look at the chart below.
Tuesday Morning Corp. (TUES - Snapshot Report) operates as a closeout retailer of upscale furnishings and house wares in the United States and has a market cap of $269 million.
As the only small capper of the group, TUES has been on a tear this year, taking flight in mid January from $3.50 and recently topping off above $7. Tuesday Morning is definitely a turnaround story as the company continues to make progress with managing costs and opening new stores. The strategy is showing up in earnings, with an average surprise of 10% over the last four quarters. This Zacks #1 rank stock does look pricey at these levels but the stochastic below the chart is signaling oversold territory. Take a look below.