This firm’s established business model keeps customers coming back for more and should continue to reward patient shareholders over the long run. The dividend looks sustainable and the company’s global network should hold up even in difficult times.
The stock trades at 22.5 times the company’s 2023 earnings forecast.
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THE TJX COMPANIES (Symbol TJX on New York) is a leading off-price retailer of clothing, accessories and home fashions. Off-price retailers purchase merchandise at below-wholesale prices and charge less than retail prices.
Through their shares, investors tap a network of stores. In the U.S., TJX operates 1,290 T.J. Maxx locations, 1,157 Marshalls, 862 HomeGoods, 62 Sierra Trading Post outlets and 40 HomeSense locations. In Canada, it has 295 Winners outlets, 150 HomeSense locations and 106 Marshalls stores. TJX also operates in Europe, with 626 TK Maxx and 77 Homesense stores; and in Australia, with 71 TK Maxx outlets.
Some investors might be concerned that in November 2022, some TJX executives and board members sold large amounts of shares:
For example, executive chair Carol Meyrowitz sold 16,223 shares at $79.79 each for a total of $1.3 million. She still holds 209,390 shares. Executive vice president Louise Greenlees sold 6,708 shares at $79.99 each for a total of $536,572. She still holds 51,627 shares.
Growth Stocks: Insider sales shouldn’t be an issue with this proven formula
However, we think it’s a mistake to put too much weight on insider trading, since insiders can delude themselves about their company just as easily as outsiders. However, it pays to remember that insiders may sell for a variety of personal reasons that have nothing to do with the company. On the other hand, insiders only make substantial buys for one reason—they think the company has investment appeal. So, insider buying is a more powerful indicator than insider selling.
We think that you need to look at insider selling (and buying) on a case-by-case basis. It’s just one of many factors worth considering.
Meanwhile, although it faces challenges, TJX’s outlook is very positive for investors.
Apart from inflation hurting consumer confidence, like most retailers, TJX faces challenges from labour shortages and rising freight costs. Meantime, rather than shifting online in a major way, the company will stick with its successful formula. To find attractive deals for its customers, it depends heavily on the skills of its merchandise buyers, many of whom have been with the company for decades. TJX stores then quickly turns over limited quantities of products—all sold at bargain prices.
The result is an ongoing treasure hunt that spurs regular store visits and encourages consumers to buy immediately rather than risk someone else snatching up a deal. Once the retail landscape regains an even more normal footing, TJX’s winning formula will continue to be a big plus for both its customers and its investors.
The shares currently yield 1.5% and trade at 22.5 times forecast earnings, a reasonable valuation in light of the company’s established business model and regular growth.
Recommendation in Power Growth Investor: The TJX Companies is a buy.