Barring a few hiccups, year 2017 has so far turned out to be a great one for investors. The “Trump Factor” has provided the much needed boost to the stock market that has scaled new highs. Major indices like the Dow Jones Industrial Average, S&P 500 and NASDAQ have gained 4.7%, 5.4%, and 9.6%, respectively, year to date. Additionally, consistent encouraging economic data along with the recent hike in benchmark interest rate highlights the underlying strength.
Most of this euphoria stemmed from the new administration’s pledge to relax regulatory measures, cut taxes and increase infrastructure outlays. However, Trump’s failure to keep his campaign promise of revamping U.S. healthcare was a major setback. Nevertheless, Trump has hardly inherited any “mess” and if his growth-friendly policies are enacted, it would provide further impetus to the stock market.
Where to Focus?
Among the 16 Zacks categorized sectors, we are focusing on Retail-Wholesale today. The sector has gained 6.8% so far in the year and has comfortably outperformed the S&P 500 index. We believe that the favorable economic indicators and friendlier fiscal and regulatory policies from the current regime 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. Undoubtedly, the retail sector presents itself as a lucrative investment hub amid such a backdrop. These factors are playing a crucial role in raising buyers’ confidence.
U.S. consumer confidence leaped in March to the highest level since Dec 2000 amid growing labor market optimism. Per the Conference Board, the consumer confidence index jumped to 125.6 in March from 116.1 in February, surpassing the consensus expectation of 113. Employers added almost half a million jobs in the first two months of 2017.
We expect this positive sentiment to translate into higher consumer spending, which accounts for about two-thirds of the U.S. economic activity. Consumer spending in the fourth quarter of 2016 improved 3.5%, while the U.S. economy expanded at an impressive rate of 2.1%. Although, consumer spending inched up 0.1% in February, following a 0.2% jump in January, it does not indicate that the economy is devoid of momentum.
All these factors call for investing in some rock solid stocks that have not only outperformed in the current bull market but also have scope to touch new highs as validated by their Zacks Style Scores.
Tune into These 5 Retail Stocks
Here we have highlighted five Retail/Wholesale stocks that have a favorable combination of a Zacks Rank #1 (Strong Buy) or #2 (Buy) with a VGM Score of “A” or “B.”
We suggest investing in The Children’s Place, Inc. (PLCE – Free Report) , with a long-term earnings growth rate of 8% and a VGM Score of “A.” In the past six months, the stock has surged roughly 48.3% and outperformed the Zacks categorized Retail-Apparel/Shoe industry, which declined 15.7%. This specialty retailer of children’s apparel delivered an average positive earnings surprise of 39% over the trailing four quarters and flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
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 “B.” 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 #1. We note that in the past six months, the stock advanced approximately 27.5%, while the Zacks categorized Retail-Consumer Electronic industry gained 18.1%.
Investors can count on Rush Enterprises, Inc. (RUSHA – Free Report) , an integrated retailer of commercial vehicles and related services with a long-term earnings growth rate of 15%. The company posted an average positive earnings surprise of 12.8% over the trailing four quarters and has a VGM Score of “A.” In the past six months, this Zacks Rank #1 stock exhibited a bullish run and surged 29.6%, while the Zacks categorized Retail/Wholesale Auto/Truck industry declined 6%.
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 “A.” The company posted an average positive earnings surprise of 3.4% in the trailing four quarters and has a long-term earnings growth rate of 10.4%. The stock surged 37.8% in the past six months and comfortably outperformed the Zacks categorized Retail-Food & Restaurants industry, which increased 4.5%.
You may also consider Bob Evans Farms, Inc. (BOBE – Free Report) , which owns and operates full-service restaurants under the Bob Evans Restaurants brand. The stock carries a Zacks Rank #2 and has a VGM Score of “B.” The company posted an average positive earnings surprise of 12.7% in the trailing four quarters and has a long-term earnings growth rate of 11%. In the past six months, the stock has displayed a fabulous bull run on the index and has risen 66.8%, while the Zacks categorized Retail-Food & Restaurants industry increased 4.5%.
These five stocks are not the only ones to bet on. With the help of the Zacks Stock Screener and some permutation and combination, you can find out other stocks that have the potential to beat the market.
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