Pop Quiz: Is Australia over the worst of its economic slowdown?
Well, although it may come as a shock to some, a number of 'experts' are predicting the next move for official interest rates will be UP!
Interest rates are a barometer of the health of the economy, of course. They are the brakes and the accelerator for the Reserve Bank of Australia (RBA) to control growth.
If rates go up, the RBA thinks the economy is doing better than expectations. If rates go down, they're seeking to stimulate growth for one or more reasons.
The slowdown in mining is what caused the RBA to recently lower rates to the current record low of 2%.
A stronger economy? Start here.
While I think it may be a little premature to predict interest rate rises any time soon, investors optimistic about the economy should now be positioning their share portfolios for the potential uptick in economic growth.
One promising way to do that is by buying retail stocks. Since they're susceptible to economic swings, retail stocks are fickle, sure, but that works both ways.
With a new Prime Minister and Treasurer in place, the dollar lower and house prices rising in the double-digits year over year, leaps in confidence may come round quicker than many expect. And such a flurry of economic activity will likely be a boon for savvy investors holding retailers.
3 delicious retail stocks to buy now
The following ASX-listed companies could play into the theme of a stronger economy but also have growing overseas exposures, big dividends and excellent managers. I think they could be deserving of a buy rating right now.
- Retail Food Group Limited (ASX: RFG) – dividend yield: 5.8% fully franked
Retail Food is the owner of Brumby's, Pizza Capers, Gloria Jean's, Donut King and so much more. Further, its growing exposure to coffee is a promising move for its international expansion.
- Premier Investments Limited (ASX: PMV) – dividend yield: 3.87% fully franked
Premier Investments is run by one of the savviest retail investors in Australia, Solomon Lew, and houses some great brands such as Just Jeans, Portmans, Peter Alexander, Jay Jays and Smiggle. It's currently expanding in the U.K.
- Flight Centre Travel Group Ltd (ASX: FLT) – dividend yield: 4% fully franked
Investors were recently spooked when Flight Centre apparently lost 0.3% share of the local leisure travel market, and its shares slumped. However, the owner of Flight Centre, Corporate Traveller and many other brands has significant appeal at these levels.
Buy, Hold or Sell?
Of all retailers on the ASX, these three are in my top five. I think their current leadership teams are excellent and the businesses themselves hold appeal over the long term. While Retail Food Group may have faced a little selling pressure lately, I think it –- and the other two – offer excellent value today for those focused on the long term.
