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

It currently yields around 10%. Looks like HBC here with old style retailer. Margins are coming under pressure and value has been hard to turn. Would prefer the Bay because of their real estate than Macy's.

Nothing will change here in the long-term. Be selective in investing in retail today. He prefers Costco, which offers the lowest prices, and Amazon whose margins keep improving. Why bother with retailers who may be overtaken by new business models? The overall economic boom may raise all boats, but how long can that last?

Retail sales is not going away, it is just the model and delivery sources that is changing. Online is taking from bricks and mortar. There won’t be one winner and one loser. There’ll just be a tug-of-war. The numbers basically support online growing at 12%-14%, and bricks and mortar growing at 1% or 2%. That is going to go on for some time. This company has a lot of embedded capital, and they can’t be nimble. They have to create a new desire for people to come into their stores.

(A Past Top Pick Jan 30/17, Down 35%) It is a turnaround stock and she hoped it would be a quicker turnaround. They announced they are closing 100 stores and repurposing the stores or selling them off. They can compete in the online sales space. She still believes it can be one of the retail turnaround stories.

As a contrarian and because this is such a brand name, he likes this and would take a position. Many people don’t realize that in many cases they own the real estate their stores are occupying. There is some upside from the real estate portfolio, and he can see them unlocking some of that value. They are jettisoning some of their underperforming stores.

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.