Larry McDonald says: 'Get long retail'

McDonald: Risk/reward is fantastic in retail

The retail sector has been experiencing a significant slump lately, but for one noted investor it's a great time to get into the space.

A number of retailers dealt with a difficult holiday shopping season that saw giants like Macy's struggle, though the NRF reported that sales were up 4 percent, above estimates of 3.6 percent. There is also concern over a possible border adjustment tax proposed by Republicans that could hit retailers hard.

However, Larry McDonald, managing director at ACG Analytics, believes the border adjustment tax will likely be just an "updated outline" of what was provided this past summer.

"This Senate is toxic, guys. This tax bill is light-years away from happening, and even when it does happen, let's just say it does pass ... the tax cuts on the individual side and on the corporate side eventually will ... outweigh the border adjustment tax negative on retail," he said in an interview with CNBC's "Halftime Report" on Friday.

The SPDR S&P Retail ETF is down 0.43 percent year to date. The ETF got a boost from Nordstrom this week after President Trump tweeted at the company for dropping his daughter Ivanka's brand from its stores. Shares are up 2.14 percent for the week.

"Here's the key number: 24. The retail space over the last 24 months is underperforming the S&P by 24 percent — the most significant underperformance for the retail sector since the 1990s recession. The risk reward is fantastic," McDonald said. "Get long retail."