Prime shares play to deal with the surge in client spending

The sustained momentum, the launch of the vaccine and a reopening economy are putting consumers in the buying mood.

Retail sales rose nearly 10% in March, the second-best increase in history.

Retail heavyweights like Amazon and Walmart aren’t the only ones who could benefit from this. CNBC’s “Trading Nation” asked traders which under-the-radar retail stocks they were watching.

“We’re seeing pent-up demand meet unsold inventory and that brings us to the liquidators,” said Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors.

Sanchez said Thursday that liquidators like Ross Stores and TJ Maxx traded well with strong growth during the pandemic, which boosted valuations for these stocks. There is one stock that still offers “growth at a reasonable price,” it is sad.

“Big Lots is an interesting name. They actually had very strong sales growth last year,” said Sanchez. “Their expectations are still extremely high, but they are trading at 11.5 times the future profitability compared to an industry average of 30 times. We think this is an interesting opportunity.”

Big Lots is up 60% this year, better than the XRT Retail ETF’s 44% growth. Stocks have retreated 5% from their all-time high in March.

Craig Johnson, Piper Sandler’s chief market technician, said Guess was a stock with potential.

“Here’s a stock that really isn’t on many radars. It has a market cap of $ 1.75 billion and only a handful of analysts are closely following this company,” Johnson said Thursday.

He said the stock is breaking out on highs that have not been seen in a “consistent uptrend” since 2018. Shares are up 22% this year.

“The stock trades at 15.5 times its forward numbers, which is way below where some of its competitors like Abercrombie & Fitch and Gap and Levi trade,” he said. “So we think this is some kind of those little gems out there that … we think this should be that we would buy.”

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