There is nothing like buying a winning stock. All I need to do is make the right choice and watch my money grow. FTSE 100 retail shares have been a good example of such stocks in the past year.
I bought one such — athleisure retailer JD Sports Fashion (LSE: JD). And it has pretty much consistently been the best performing stock in my portfolio, along with a couple of miners. I do regret, however, not buying another FTSE 100 retailer, Next (LSE: NXT) during the last stock market crash.
Next shows impressive share price growth
Over the past year, it has seen an almost 60% share price increase. And its recent trading guidance only builds up more expectations. It just reported robust performance for the 11 weeks ending 17 July.
Its revenues increased by 18.6% from the numbers two years ago. It does not compare them with last year’s figures, presumably because they do not accurately represent a comparison between normal years. But even compared to 2019, the revenue growth number was a huge increase from the 3% that was expected. As a result, Next has increased its profit guidance for the full year by £30m to £750m.
JD Sports Fashion is optimistic
Similarly, JD Sports Fashion stock is up almost 50% over the past year. In its latest trading statement, the company said that it is on track to deliver pre-tax profits of “no less than” £550m. This follows encouraging spending trends by consumers.
The downside to buying these FTSE 100 stocks
As positive as these developments sound, I do wonder as an investor now, if it is too late to buy these stocks. I say this for several reasons. The first is that they are more expensive than some other high-quality FTSE 100 stocks. Next, for instance has a price-to-earnings (P/E) ratio of 36 times, while the P/E is at 40 times for JD Sports Fashion. I think they are in for competition for investors’ money at these levels.
Moreover, there are at least a few one-time reasons for a rise in recent sales numbers. After the easing of lockdowns, people are going out again and for that reason, buying more clothes and shoes. Also, savings have increased during the lockdown as there were limited avenues to spend. These benefits are likely to diminish in the next few months.
The pickup in the economy has been limited so far as well. The latest retail sales numbers have bounced back in June, but they did fall in May, even if unexpectedly. My point here is, that the recovery may not be as strong as was earlier anticipated.
Stock market crash buys
That said, the stock market has had a wobble in the past few days. If the markets continue to slide downwards or there is another big stock market crash, I think both Next and JD Sports Fashion would be good stocks for me to buy into or buy more of.
Manika Premsingh owns shares of JD Sports Fashion. The Motley Fool UK owns shares of and has recommended Next. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.