Macys Inc. (formerly Federated Department Stores) (M)

A tough space. She owned Kohl’s for a while, who are trying so hard to get people into their stores, which is really, really difficult. The whole group is trading at a 55% discount to the broader market.

(A Top Pick June 23/16. Down 26.65%.) The whole consumer discretionary space over the last 9 months has been awful. He sold his holdings at about the price he bought it for.

It has been a disaster for all of these large “mall anchor” retailers. Their overhead is very high. With online and boutiques, you are less inclined to go to one of the big stores. This company has had a lot of other challenges as well. They have gone from share repurchases to repayment of debt. The stock is down around 31% over the last year. He doesn’t see a turn around for the space.

You have to have a sustainable, repeatable process to succeed in the market. Brick-and-mortar retail is dying. “Online sales” is crushing it, and will continue to do so for a while.

There have been a lot of negatives. They are another of the transitions companies. They are closing about 100 stores and transitioning to more online sales. They tend to be able to execute their strategic plans. She expects a decline in earnings this year and the turnaround will be about 3 years. She thinks they can weather these types of storms. Almost a 5% dividend yield. (Analysts' target: $37.30).

They trade at about half of the valuation that the rest of the market trades at. They have struggled with traffic and inventory. They are working on getting quicker speed to market and return on capital. They need to get more sales out of less inventory. But traffic is the golden goose. It will be volatile until they solve that problem. At some point things will shift and people will get excited about getting back into these stores.

(A Top Pick June 1/16. Up 10.12%.) He sold it when it hit $40. It is not something he thinks would continue to rise. In the low $30, he still likes it and would have no problem with it.

They delivered earnings to the down side more than others at the beginning of the year. Retailers have problems with ecommerce.

Wouldn’t invest in this for the long-term, because the headwind of Department stores or brick-and-mortar type retailers is severe. People are getting involved with the ease of online shopping and its cost effectiveness.

This is bottom fishing. It has had a nice pullback. His model price is $42, a 27% upside. Dividend yield of 4.46%.

The sector is under pressure and the stock has collapsed. He likes to find things that are under pressure. If this was the only company that looked like this, he wouldn’t have picked it, but a lot of retailers look like this. It stopped at $30 and has already rallied up 10%. Thinks it has a very, very good chance of getting back up to $40.

Have both Macy’s and Bloomingdale brands. Extremely well-managed. They are executing very well within store, e-commerce and their marketing initiatives. Revenues are 100% from the domestic US market. The improving US labour market and lower energy costs means more money for consumers to spend. 13X forward earnings with 10% long-term EPS growth.

Like this as well as Walmart, however it is more volatile, so it needs to be watched closer. Take profits when it's up.