If you wish to make merry this Christmas holidays, you still got time to add that extra jingle to your portfolio by adding growth stocks. Notably, these are hot and flourishing stocks with earnings growth potential. A booming U.S. economy as evident from third-quarter GDP growth rate of 3.3%, supportive monetary policy as well as tax reform and robust corporate earnings all seem to be working in tandem for investors.
Barring a few hiccups, the U.S. stock market has displayed a decent run. So far in the year, the S&P 500 has gained 17.5%, the Dow Jones Industrial Average has advanced 22.3%, while the tech-laden Nasdaq Composite Index has surged 25.6%. We believe that if the government well channelized the policies and implements pro-investors and pro-corporate reforms, the major indices could attain new highs.
Well the recent tax overhaul plan passed by the Senate seems to be working in favor of retailers, who topped the list with a corporate tax rate of as much as 35%. President Trump has been advocating a tax rate of as much as 20% and pushing hard to pass on the benefits to companies who generate all or most part of revenues in the United States. Well this may not go well down with sectors, which fall under the low tax bracket and enjoy other tax benefits.
Nevertheless, among the 16 Zacks categorized sectors, we are focusing on Retail-Wholesale sector today. The sector has gained 27% so far in the year, comfortably outperforming the S&P 500 Index.
Retail Seems to be the Season’s Demand
Improving labor market, rising disposable income and elevated consumer sentiment have ushered confidence in retailers about a robust holiday season. The festive season is often a make-or-break time for retailers, as it accounts for a sizeable chunk of yearly revenues and profits. The five-day holiday period starting from Thanksgiving, followed by Black Friday, Small Business Saturday to Cyber Monday, marked an auspicious start to the season.
Indeed, shopping season is likely to be more blissful for retailers. With Christmas falling on Monday and 32 days after Thanksgiving, shoppers are getting one extra day compared with last year and an extended weekend to do last minute purchasing.
Overall, NRF projects a 3.6-4% rise in November and December sales (excluding autos, gas and restaurant sales) to $678.75-$682 billion, up from $655.8 billion last year and better than the five-year average sales growth of 3.5%. Data compiled by eMarketer forecasts 3.1% jump in holiday sales (November and December) to $923.15 billion, while retail e-commerce holiday season sales are anticipated to rise 16.6%.
Having said that we believe the sector offers lucrative opportunities for investors to make their Christmas holidays special. Here we have highlighted four Retail/Wholesale stocks with a favorable combination of a Zacks Rank #1 (Strong Buy) or #2 (Buy) and a Growth 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.
4 Prominent Picks
We suggest investing in PetMed Express, Inc. PETS with a long-term earnings growth rate of 10% and a Growth Score of A. In the past one year, the stock has surged roughly 82.8% and outperformed the industry, which grew 50.2%. The operator of pet pharmacy in the United States delivered an average positive earnings surprise of 23.5% in the trailing four quarters and sports a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.
Another solid bet is The Home Depot, Inc. HD, which has a long-term earnings growth rate of 13.4% and a Growth Score of B. This home improvement retailer delivered an average positive earnings surprise of 3.9% in the trailing four quarters and carries a Zacks Rank #2. In a year, the stock has advanced approximately 38%, while the industry has gained 28%.
Investors can count on The Children's Place, Inc. PLCE with a Growth Score of B and a long-term earnings growth rate of 9%. In a year, this Zacks Rank #2 stock has advanced roughly 22.8%, while the industry witnessed a decline of 18.4%. This children's specialty apparel retailer delivered an average positive earnings surprise of 14% in the preceding four quarters.
Burlington Stores, Inc. BURL, a retailer of branded apparel products, is also a lucrative option with a Zacks Rank #2 and a Growth Score of A. The company posted an average positive earnings surprise of 15.2% in the trailing four quarters and has a long-term earnings growth rate of 17.5%. The stock has surged 25.2% in the past one year and comfortably outperformed the industry’s increase of only 7.1%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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