Last year, COVID-19 caused a great deal of confusion.
Stay-at-home orders and widening social distance have forced businesses to change the way things are done rapidly.
Some excel at focusing on e-commerce and offering delivery and pickup options. Others have declared bankruptcy or more and have been frustrated.
Still, others saw it as a learning opportunity …
Check out these headings:
- “Macy’s plans to close 10 department stores in January.”
- “Macy’s follows Wal-Mart’s Amazon in developing the digital marketplace.”
- “CVS will close 900 stores with a major retail strategy shift.”
When you read about store closures, it usually means that your business has gone the wrong way.
But the situation can be different Macy’s Inc. (NYSE: NS). When CVS Health Corp. (NYSE: CVS)...
Major changes in the retail industry
COVID-19 hit Macy’s with a mallet. For eight months after the market crash in March 2020, stock prices remained close to their 12-year lows.
But 2021 was a different story. Investors poured into stocks, up 300% compared to last year.
CVS has improved a bit until 2020, thanks to the nature of its business. We hope that drugstores can survive the pandemic. The rise in stock prices isn’t very impressive, but CVS stocks have risen 44% in the last 12 months.
And now, these companies are changing their strategies for the future.
According to Macy’s CEO Jeff Gennette, Macy’s is working with consulting firms to increase their online presence. The news, along with the blockbuster third-quarter earnings report, boosted Macy’s share price by 21% on Thursday.
On the other hand, CVS Closed 10% of physical locations (about 900 stores) over the next three years. This is part of an effort to focus more on the health services business.
I think this is an exciting change for both companies. This shows that these more traditional businesses are embracing change.
Let’s see how they stack up with Adam O’Dell’s unique Green Zone Rating System.
Green Zone Ratings: Macy’s and CVS
At first glance, both of these strains now look great.
Both stocks are “bullish”. In short, it is expected to double the overall market in the next 12 months.
Both of these are games of great value. CVS has a valuation of 83 and Macy’s has a rating of 91. Macy’s price-earnings ratio of 13 is much lower than the consumer’s discretionary average of 32.
Looking at both strains side by side, it is interesting to see how similar they are throughout the Green Zone assessment. (Read the details of each element at the end of this story.)
Both boast excellent reputations for value, quality and growth, which are fundamental elements.
Both are huge companies. Therefore, the size rating is very low.
It comes down to momentum and volatility. CVS has been steadily rising since last year, so it has a low momentum score and a high volatility rating of 84 (the higher the volatility score, the lower the volatility).
Macy’s has gained momentum lately, but wasn’t affected by the big sellouts along the way. As I write, M is up 20% on Thursday and then down almost 5% on Friday morning.
Conclusion: At least for now, I think both Macy’s and CVS are worth your list of candidates.
Macy’s added 4.4 million new customers in the last quarter and we are heading for a huge holiday season.
CVS may not be as exciting until the end of 2021, but I think there is plenty of potential to establish itself as a threat in the healthcare sector. We have over 9,000 stores in the United States, Puerto Rico and Brazil. CVS can be a mild illness or the number one stop for illness.
Evaluation factors for the green zone
Momentum — — Strong upward trend Shares earn taller than Evaluation of momentum. We prefer to buy stocks that are already on a higher trend than the entire market at a faster rate. This approach can increase the probability of success and reduce the risk.
worth — — Cheaper (Also known as “cheap”) Earn stocks taller than Value evaluation. We prefer to buy good companies at good prices because the price we pay affects future profits. Overpayment of stocks can be a costly mistake.
quality — — High quality Companies earn taller than quality evaluation. Of course, we prefer to buy a high quality company! To determine quality, the model considers, among other things, the company’s profitability, rate of return, cash flow, debt ratio, and operational efficiency.
growth — — High growth Companies earn taller than growth rate. Because everything is the same, we prefer to buy companies that are growing both revenue and revenue at a faster pace than the market or economy.
size — — smaller company earns taller than Size evaluation. We usually prefer to buy a small company for the additional “juice” that comes with them.
Volatility — — Low volatility Shares earn taller than Volatility rating. Low volatility stocks are recommended as they have less heartburn and have been proven to produce excellent risk-adjusted returns in the long run.
Assistant Managing Editor, Money & Market
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