Analysis: KSS WM JWN

After you receive this Alert, we will be initiating a position in Kohl's Corp. (KSS) , buying 600 shares at roughly $63.91. Following the trade, KSS will represent 1.47% of the portfolio.

We are continuing our strong push to reposition toward domestic names and away from dicey tech and companies at the crosshairs of trade conflicts. Furthermore, our exit of Waste Management (WM) from earlier this morning (see our Alert here) provided us with the flexibility to put additional capital back to work. Lastly, consistent with our commentary from earlier this morning about our repositioning and buying strategy, we want to incrementally put capital to work at prices when best fit. In addition to our bullish views on Kohl's (detailed below), with shares of Kohl's down roughly 2% this week, the stock meets all our conditions for an initiation.

As we noted in our detailed bullpen Alert here, we believe tax reform and economic expansion is resulting in higher levels of disposable incomes in consumers' pockets, a factor that has helped retail return from its 2017 lows. Furthermore, we believe that by featuring the Amazon Smart Home Experience at select locations, shoppers will be drawn in to the store, allowing for increased levels of customer engagement. And, while we remain bullish on our other retail holding, Nordstrom (JWN) , we believe the addition of Kohl's will increase diversity within the retail sector as the company targets a different demographic of shoppers. Whereas Nordstrom targets higher-income shoppers via its main stores, and discount shoppers via Nordstrom Rack, Kohl's offers exclusive brand apparel, shoes, accessories and home & beauty products for women, men and children targeted to middle-income customers through its 1,158 department stores and Kohls.com, which includes merchandise available in-store and online exclusives.

The one factor that remains consistent across both names is the investment in technology. We believe the company's investments in technology will aid in bridging online with brick and mortar, making for a fully immersive omni-channel experience. Investments on this front include, in-store pickup, ship from store capabilities, the Kohl's mobile app with digital wallet and Kohl's Pay -- a mobile payment option which integrates the Kohl's Charge private label credit card into the Kohl's app.

Perhaps most telling of the companies operational ability is that although retail has seen an immense amount of disruption, thanks largely to Amazon and the rise of eCommerce, Kohl's has managed to remain profitable and more than double its dividend (which now sits at a roughly 3.9% yield) since 1Q11, when it first began, buy back over 50% of shares since 2006 and reach an ROI of 15% since 2012.

We will be initiating our position in KSS with a price target of $74 which reflects slightly over 14 times consensus 2019 earnings per share.