If soft February retail sales have put you in a spot of bother, we advise you to dismiss concerns about its impact on your portfolio or the economy at large. The “Trump Factor” has provided the much needed boost to the stock market that has scaled new highs and the recent hike in the benchmark interest rate to 0.75–1% only signals the underlying strength in the economy.
Industry experts believe that the delay in income tax refunds may have resulted in soft retail sales last month and expect sales to pick up in March. U.S. retail and food services sales increased 0.1% in February, following a revised upward reading of 0.6% growth registered in January. However, retail sales increased 5.7% from Feb 2016. This shows that consumer spending – one of the pivotal factors driving the economy – remains strong.
Although, the Retail-Wholesale sector has not been a spectacular performer, it still holds promise, given the favorable economic indicators. Moreover, friendlier fiscal and regulatory policies from the current administration also bode well for the sector. The recent rebound in oil prices, an encouraging employment picture, and a gradual improvement in the manufacturing sector and housing market signal that the economy is on a recovery mode. The economy added 235,000 jobs in February, while the unemployment rate was down to 4.7%.
Amid such a backdrop, the retail sector presents itself as a lucrative investment hub. We have identified five Retail-Wholesale stocks based on a favorable combination of a Zacks Rank #1 (Strong Buy) or #2 (Buy) and a VGM Score of “A” or “B.” These stocks are backed by sound fundamentals, surging share price and a track record of better-than-expected results. Not only this, these stocks have outperformed their respective industries.
5 Prominent Picks
We suggest investing in The Children’s Place, Inc. (PLCE – Free Report) , a specialty retailer of children’s apparel, with a VGM of “A” and long-term earnings growth rate of 10.3%. The company posted an average positive earnings surprise of 39% in the trailing four quarters. In the past six months, the stock has surged roughly 47.8% and outperformed the Zacks categorized Retail-Apparel/Shoe industry, which declined 12.5%. Moreover, it sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Darden Restaurants, Inc. (DRI – Free Report) , which owns and operates full-service restaurants, is a solid bet, with a Zacks Rank #2 and a VGM Score of “B.” The company posted an average positive earnings surprise of 2.6% in the trailing four quarters and has a long-term earnings growth rate of 11.5%. The stock is up roughly 23% in the past six months and has comfortably outperformed the Zacks categorized Retail-Food & Restaurants industry, which declined 0.7%.
We suggest investing in Dave & Buster’s Entertainment, Inc. (PLAY – Free Report) , which has a long-term earnings growth rate of 17.5% with a VGM Score of “A.” This owner and operator of entertainment and dining venues delivered an average positive earnings surprise of 37.8% in the trailing four quarters and carries a Zacks Rank #2. We note that in the past six months, the stock has advanced approximately 46.5%, while the Zacks categorized Retail-Food & Restaurants industry declined 0.7%.
Another stock worth considering is Best Buy Co., Inc. (BBY – Free Report) , which has a long-term earnings growth rate of 10.5% and a VGM Score of “A.” This retailer of technology products, services, and solutions delivered an average positive earnings surprise of 27.7% in the trailing four quarters and carries a Zacks Rank #2. We note that in the past six months, the stock has advanced approximately 19.5%, while the Zacks categorized Retail-Consumer Electronic industry gained 12.6%.
You may also safely bet on Kate Spade & Company (KATE – Free Report) , a designer and marketer of apparel and accessories. The stock carries a Zacks Rank #2 and has a VGM Score of “A.” The company posted an average positive earnings surprise of 14.6% in the trailing four quarters and has a long-term earnings growth rate of 28.3%. In the past six months, the stock has displayed a fabulous bull run on the index and has risen 29.6%, while the Zacks categorized Retail-Apparel/Shoe industry decreased 12.5%.
While these five stocks are not the end of the road, with the help of the Zacks Stock Screener and some permutation and combination, you can find out stocks that have the potential to beat the market.
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