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4 Retail Stocks to Help Steer S&P 500 to New Highs in 2020

Sumit Singh

In spite of a roller coaster ride on Wall Street — thanks to the U.S.-China trade war — S&P 500 index has displayed a sturdy run in 2019. Notably, the broadest measure of the equity market has added as much as 28% to its value so far this year. Given a favorable economic backdrop and a recent agreement on a phase one trade deal, the momentum is likely to sustain in 2020. Even some market pundits believe that re-election of Donald Trump as President will help maintain the bull run.

In 2019, the market became witness to decent corporate earnings, three cuts in benchmark interest rate — in July, September and October — and inflow of positive news on the U.S.-China trade front and Brexit issue. Apart from these, rising job growth and a 50-year low unemployment rate also helped boost the market sentiment. Further, a rebound in factory production, robust domestic homebuilding market and increase in consumer spending added to the optimism.

Notably, the economy grew at a decent pace in the first three quarters of 2019. Per the Commerce Department, GDP increased at a 2.1% annualized rate during the third quarter, while consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 3.2%. In fact, consumer spending rose at a 0.4% annual rate in November, the best rise since July. Further, personal income rose 0.5% last month, after a slight increase of 0.1% in October.

As Americans continue to splurge, it seems prudent to invest in the Retail-Wholesale sector, which occupies top 13% position in the list of Zacks sectors (two out of 16). Meanwhile, the sector has gained roughly 26.3% so far in the year. Per the latest Earnings Preview, the sector is likely to register top and bottom line growth of 5.3% and 8.6%, respectively, in the next financial year.



Here we have highlighted four Retail-Wholesale stocks — having a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) — that are ready to help steer S&P 500 index to new highs in 2020.

4 Prominent Picks

We suggest investing in Target Corporation TGT with a long-term earnings growth rate of 7.5%. This general merchandise retailer has a trailing four-quarter positive earnings surprise of 8.6%, on average. The Zacks Consensus Estimate for top and bottom line for the next financial year indicates year-over-year improvement of roughly 3.7% and 7.6%, respectively. The stock, which sports a Zacks Rank #1, has soared 95.5% so far in 2019. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chipotle Mexican Grill, Inc. CMG, a chain of fast casual restaurants, is also a solid bet with a Zacks Rank #2. The company has a trailing four-quarter positive earnings surprise of 16.1%, on average. The Zacks Consensus Estimate for top and bottom line for the next financial year suggests year-over-year growth of about 12.4% and 28.2%, respectively. The company, with a long-term earnings growth rate of 19.7%, has seen its shares surge 93.8% so far this year.

Investors can also count on Best Buy Co., Inc. BBY, which operates as a retailer of technology products, services, and solutions. This Zacks Rank #2 company has a long-term earnings growth rate of 8.7%. The company has a trailing four-quarter positive earnings surprise of 9.9%, on average. The Zacks Consensus Estimate for top and bottom line for the next financial year indicates year-over-year improvement of roughly 1.7% and 4.7%, respectively. Notably, shares of the company have increased 64.3% year to date.

You can also add Ross Stores, Inc. ROST to your portfolio. This operator of off-price retail apparel and home fashion stores has a long-term earnings growth rate of 10.5%. This Zacks Rank #2 stock has a trailing four-quarter positive earnings surprise of 3.8%, on average. The Zacks Consensus Estimate for top and bottom line for the next financial year suggests year-over-year increase of 6.1% and 8.3%, respectively. Moreover, the stock has appreciated 38.2% year to date.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
 
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
 
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