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How do US S&P Retail Stocks interact with each other? We Let our AI Models Explain

Oct 04, 2018

  • We did a study of how the NTM P/Es of stocks in the S&P Retail Index move together
  • Our analysis takes 18 months of NTM P/E daily data and uses a K-Means algorithm to observer how the stocks in the S&P Retail index cluster together
  • While we don't observe a lot clustering based on industry groups, we do see clustering around thematic plays: as an example, Costco, Ross Store, TJ Maxx, and Wal-Mart cluster together in Cluster 8.  While they are in different industry groups, it is intuitive that low-cost apparel retailers trade similarly to wholesale supermarkets/hypermarkets
  • The behavior of Cato Corp and Office Depot market valuations appear to be disconnected from the rest of the industry -- maybe this is a good stock pick for active investors looking for idiosyncratic risk.  We rate Cato Corp "Neutral" in our US SMID-Cap Global Top Picks and "Attractive" in our US Consumer Discretionary Global Top Picks.  We rate Office Depot "Neutral" in our US SMID-Cap Global Top Picks and "Neutral" in our US Consum Discretionary Global Top Picks.

 

18-Month Clustering of S&P US Retail Stocks based on Volatility and Price Returns

Cluster 1 Hibbett Sports Inc - Specialty Stores, Quotient Technology Inc - Internet and Direct Marketing Retail, Wayfair Inc - Internet and Direct Marketing Retail
Cluster 2 Rent-A-Center Inc - Computer and Electronics Retail, Shutterstock Inc - Internet and Direct Marketing Retail, SUPERVALU Inc - Food Retail, 
Cluster 3 Buckle Inc - Apparel Retail, Genesco Inc - Apparel Retail, Shoe Carnival Inc - Apparel Retail, Stamps.com Inc - Internet and Direct Marketing Retail, Tailored Brands Inc - Apparel Retail, 
Cluster 4 Boot Barn Holdings Inc - Apparel Retail, Epress Inc. - Apparel Retail, GrubHub Inc - Internet and Direct Marketing Retail, Signet Jewelers Ltd - Specialty Stores
Cluster 5 Carvana Co - Automotive Retail
Cluster 6 Office Depot Inc - Specialty Stores
Cluster 7 Ulta Beauty Inc - Specialty Stores, Walgreens Boots Alliance Inc - Drug Retail
Cluster 8 Asbury Automotive Group Inc - Automotive Retail, Burlington Stores Inc - Apparel Retail, Costco Wholesale Corp - Hypermarkets and Super Centers, Dollar General Corp - General Merchandise Stores, CarMax Inc - Automotive Retail, O'Reilly Automotive Inc - Automotive Retail, Ross Stores Inc - Apparel Retail, TJX Cos Inc - Apparel Retail, Walmart Inc - Hypermarkets and Super Centers
Cluster 9 Cato Corp - Apparel Retail
Cluster 10 Chico's FAS Inc - Apparel Retail, Dillard's Inc - Department Stores, Etsy Inc - Internet and Direct Marketing Retail
Cluster 11 Overstock.com Inc - Internet and Direct Marketing Retail
Cluster 12 Amazon.com Inc - Internet and Direct Marketing Retail, MarineMax Inc - Specialty Stores
Cluster 13 American Eagle Outfitters Inc - Apparel Retail, DSW Inc - Apparel Retail, Five Below Inc - Specialty Stores, Ollie's Bargain Outlet Holding - Apparel Retail
Cluster 14 Conn's Inc - Computer and Electronics Retail, Camping World Holdings Inc - Automotive Retail, Guess Inc - Apparel Retail, Lands' End Inc - Internet and Direct Marketing Retail
Cluster 15 Advance Auto Parts Inc - Automotive Retail, Best Buy Co Inc - Computer and Electronics Retail, Caleres Inc - Apparel Retail, Casey's General Stores Inc - Food Retail, America's Car-Mart Inc - Automotive Retail, Citi Trends Inc - Apparel Retail, Nordstrom Inc - Department Stores, Kroger Co - Food Retail, Kohl's Corp - Department Stores, Monro Inc - Automotive Retail, Murphy USA Inc - Automotive Retail, Target Corp - General Merchandise Stores, Tiffany & Co - Specialty Stores, Tractor Supply Co - Specialty Stores, Urban Outfitters Inc - Apparel Retail
Cluster 16 AutoZone Inc - Automotive Retail, Big Lots Inc - General Merchandise Stores, Booking Holdings Inc - Internet and Direct Marketing Retail, Dollar Tree Inc - General Merchandise Stores, eBay Inc - Internet and Direct Marketing Retail, Group 1 Automotive Inc - Automotive Retail, Lithia Motors Inc - Automotive Retail, Penske Automotive Group Inc - Automotive Retail, Sally Beauty Holdings Inc - Specialty Stores, Sprouts Farmers Market Inc - Food Retail
Cluster 17 AutoNation Inc - Automotive Retail, Dick's Sporting Goods Inc - Specialty Stores, Expedia Group Inc - Internet and Direct Marketing Retail, Foot Locker Inc - Apparel Retail, GameStop Corp - Computer and Electronics Retail, Gap Inc - Apparel Retail, Ingles Markets Inc - Food Retail, L Brands Inc - Apparel Retail, Macy's Inc - Apparel Retail, Children's Place Inc - Apparel Retail, Zumiez Inc - Apparel Retail
Cluster 18 Groupon Inc - Internet and Direct Marketing Retail, Michaels Cos Inc - Specialty Stores, Nutrisystem Inc - Internet and Direct Marketing Retail, Party City Holdco In - Specialty Stores

Source: S&P Capital IQ