Similar to the last post’s discussion of how American consumers are switching to lower cost housing options, the second major trend for 2011 that columnists are suggesting will be a major investing opportunity relates to discount stores.
Specifically, deep discount dollar stores have been demonstrating a strong ability to perform in the recessionary environment. Realistically, there’s no denying that consumers have been hungrier than ever for a good deal. With that in mind, let’s look at two major venues that consumers use to look for a bargain.
One of the best places to find deals is through discount retailers. One the one hand, you have access to investment opportunities through WalMart-like retailers that focus on providing consumers with extremely cost effective shopping. Additionally, you can consider investing in Dollar-Store companies, which provide consumers with regular amenities for extremely low costs.
In the former, you are investing with the assumption that consumers are going to be shopping for more goods from cheaper stores. In the latter, you are assuming that more consumers will be shopping for the same goods from the discount stores. When looking at discount retailers, the general question you can ask is “Do I think that more people are going to begin looking for bargains? Or do I think that the same numbers of people are going to start looking for more bargains?”
The second option that you might want to consider for investing into bargain-hunting trends is through the online market. Companies like Amazon have been posting fantastic profits because of consumer willingness to search for convenience and savings. This has prompted companies like WalMart to enter the online market as competitors. Alternatively, you can consider Apple as being an online investment, because of the amount of revenue that they receive through ITunes.
If you want to get a little bit more aggressive, a company like Ebay would be an investment in the consumer’s desire to not only purchase cheap goods, but to sell off their own stuff to increase income. Lastly, you can maybe look at companies that offer exclusive services online. ETrade allows people to trade stocks online as a discount broker, and benefits from the bargain hunting effect.
Realistically, you can list off cost-effective retail stocks for as long as you can hold your breath. The trick is to then sit down with your financial advisor, and discuss what stocks fit best into your personal portfolio. Realistically, if you already have a technology-heavy portfolio, you might not want to jump into online retailers. Alternatively, if your portfolio is already heavily invested into equities, you might want to consider adjusting the position by instead buying bonds. Again, an investment is only as good as it applies to your personal situation.
