4 Peter Lynch Stalwart Stocks in the Defensive Retail Sector

In light of wholesale prices surging at a record pace in October, four defensive retail stocks meeting the Peter Lynch Stalwarts screener criteria are Dollar General Corp. (

DG, Financial), The Kroger Co. (KR, Financial), Big Lots Inc. (BIG, Financial) and Natural Grocers by Vitamin Cottage Inc. (NGVC, Financial).

On Tuesday, the Labor Department said that wholesale prices increased 8.6% from a year ago in October, an 11-year-high increase.

As such, investors can find opportunities in defensive retail stocks meeting Peter Lynch’s criteria for stalwart companies. The legendary Fidelity Magellan Fund manager defined a stalwart as a large, wellmestablished company that still offers good growth potential. Key criteria for stalwarts include good business predictability, 10 years of profitability over the past decade and solid 10-year revenue and earnings growth rates.

Dollar General

Shares of Dollar General (

DG, Financial) traded around $220.12, showing the stock is fairly valued based on Tuesday’s price-to-GF Value ratio of 1.02.

GuruFocus ranks the Goodlettsville, Tennessee-based discount retailer’s profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank and an operating margin that has increased approximately 0.30% per year on average over the past five years and outperforms more than 89% of global competitors.

Gurus with holdings in Dollar General include Barrow, Hanley, Mewhinney & Strauss and Pioneer Investments.

Kroger

Shares of Kroger (

KR, Financial) traded around $41.86, showing the stock is modestly overvalued based on Tuesday’s price-to-GF Value ratio of 1.18.

GuruFocus ranks the Cincinnati-based grocery store company’s profitability 7 out of 10 on the back of a 4.5-star business predictability rank and three-year revenue growth rates outperforming more than 72% of global competitors despite profit margins underperforming more than 60% of global defensive retail companies.

Gurus with holdings in Kroger include

Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A)(BRK.B) and
Jim Simons (Trades, Portfolio)’ Renaissance Technologies.

Big Lots

Shares of Big Lots (

BIG, Financial) traded around $49.57, showing the stock is fairly valued based on Tuesday’s price-to-GF Value ratio of 1.01.

GuruFocus ranks the Columbus, Ohio-based discount retailer’s profitability 7 out of 10 on the back of profit margins and returns outperforming more than 75% of global competitors.

Natural Grocers by Vitamin Cottage

Shares of Natural Grocers by Vitamin Cottage (

NGVC, Financial) traded around $12.83, showing the stock is fairly valued based on Tuesday’s price-to-GF-Value ratio of 0.93.

GuruFocus ranks the Lakewood, Colorado-based dietary supplement retail store company’s profitability 7 out of 10 on the back of three-year revenue and earnings growth rates outperforming more than 78% of global competitors despite profit margins and returns underperforming over 51% of global defensive retail companies.