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5 Retail Stocks to Buy on Trump-Induced Confidence

Zacks Equity Research

Not only is the “Trump Factor” ruling the U.S. stock market but is also boosting consumer confidence. Customers are more optimistic about the future prospects of the economy under Donald Trump’s regime. An improving job scenario, rising wages and spiraling confidence are encouraging consumers to spend more. We note that U.S. retail sales rose 0.4%, while consumer spending increased 0.2% in January.

Consumer Confidence – a key determinant of the economy’s health – improved significantly in February, reaching its highest level since July 2001. According to the recent Conference Board data, the Consumer Confidence Index surged to 114.8 last month from January’s revised reading of 111.6. This clearly indicates that consumers have given thumbs up to Trump’s revolutionary ideas.

The promise of corporate tax reform, deregulation, repatriation of corporate funds into the U.S. and the possibility of debt-fueled infrastructure spending under the Trump administration with no obvious gridlock in Congress, indicate fewer potholes for the domestic economy in 2017.

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.

According to the “second estimate” unveiled by the Bureau of Economic Analysis, the U.S. economy expanded 1.9% in the final quarter of 2016. Moreover, the economy added 227,000 jobs in January, while the unemployment rate was at 4.8%. The favorable economic scenario may prompt the Federal Reserve to increase the benchmark interest rate at least twice this year.

5 Prominent Picks

Undoubtedly, the Retail-Wholesale sector presents itself as a lucrative investment hub amid the current economic scenario. Here we have highlighted five Retail/Wholesale stocks that are ready to ride on the confidence exuded by the economy. These 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, with a long-term earnings growth rate of 10.3% and a VGM Score of “A.” In the past six months, the stock has surged roughly 18.4% and outperformed the Zacks categorized Retail-Apparel/Shoe industry, which declined 12%. This specialty retailer of children's apparel delivered an average positive earnings surprise of 36.3% 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.

Investors can count on Rush Enterprises, Inc. RUSHA, 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 49.7%, while the Zacks categorized Retail/Wholesale Auto/Truck industry climbed 11.3%.

Darden Restaurants, Inc. DRI, 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 has surged 20.2% in the past six months and comfortably outperformed the Zacks categorized Retail-Food & Restaurants industry, which fell 2.3%.

We suggest investing in Dave & Buster's Entertainment, Inc. PLAY, which has a long-term earnings growth rate of 17.5% and a VGM Score of “B.” 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 24%, while the Zacks categorized Retail-Food & Restaurants industry has declined 2.3%.

You may also consider Kate Spade & Company KATE, 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 24.3%, while the Zacks categorized Retail-Apparel/Shoe industry decreased 12%.

Endnote

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.

Zacks' Top 10 Stocks for 2017

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Rush Enterprises, Inc. (RUSHA): Free Stock Analysis Report
 
Children's Place, Inc. (The) (PLCE): Free Stock Analysis Report
 
Darden Restaurants, Inc. (DRI): Free Stock Analysis Report
 
Dave & Buster's Entertainment, Inc. (PLAY): Free Stock Analysis Report
 
Kate Spade & Company (KATE): Free Stock Analysis Report
 
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