Q: It seems like every week another major retailer is either going bankrupt or closing a bunch of stores. Are there any safe ways to invest in retail, aside from e-commerce?
It's certainly understandable to be afraid of any investments related to brick-and-mortar retail. But there are two types of retail stocks that can still be worth owning.
The first includes retailers that aren't likely to be disrupted by e-commerce headwinds. For example, have you been to a Costco (NASDAQ: COST) recently? Stores that offer bargains that online retailers can't match, like warehouse clubs, are doing just fine. Over the past decade, Costco's stock has nearly doubled the overall retail sector's returns. Retailers like CVS Health) that not only sell things people need, but also offer an element of convenience are similarly good places to look.
The second category of retail stocks worth a look are real estate stocks that focus on retail properties -- but not just any retail real estate.
Companies that create shopping and entertainment destinations like Simon Property Group could be long-term winners in the new retail environment. There are also some retail real estate investment trusts like Realty Income and National Retail Properties that specifically target tenants whose businesses are not likely to be affected by e-commerce (or recessions, for that matter).
The bottom line is that while I would certainly suggest staying away from most discretionary retail stocks and lower-quality retail real estate, there are still some smart retail investments in the current environment.
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Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool recommends Costco Wholesale and CVS Health and recommends the following options: long January 2020 $115 calls on Costco Wholesale and short January 2020 $180 calls on Costco Wholesale. The Motley Fool has a disclosure policy.