Investors Build Contrarian Bets On U.S. Bricks-And-Mortar Retailers

A small group of contrarian stock pickers are buying shares in struggling U.S. retailers as the growing challenge of online shopping has driven the traditional bricks-and-mortar sector down to valuations not seen since the financial crisis. The value of shares in U.S. retailers has fallen sharply this year because the wider market has priced in a period of painful disruption for the sector as online competition from the likes of Amazon is expected to permanently alter consumer shopping habits. Cole Smead, a portfolio manager at Smead Capital Management, a $1.2bn Seattle-based equity fund, has started to buy Target shares which have fallen nearly 19 per cent this year and currently trade at their lowest level since 2014. Mr Smead believes consensus Wall Street opinion has become too negative about stronger U.S. retailers. “We want to be where the majority of investors are not and are too scared to be, as all great and successful investing is done in the minority,” he said. “How many S&P 500 companies can be bought at 11 times free cash flow? If consensus is wrong we can make multiples on our original investment, which is hard to say about most US large-cap stocks today.” Read more at Financial Times.