With 2016 in the rear-view mirror, many investors are focused on ideas for 2017 and making the changes they feel will help lend a hand toward continued gains. One thing is for sure, the market is a lot more expensive than it was this time last year, and the going could be a touch more difficult. While the Trump rally has been solid and hopes are high for an improving economy, it still makes sense to stay with market leaders.
A new Baird research report includes the analysts' top ideas for 2017, and it is an eclectic and solid group. Many of them are small or mid-cap companies, as that is a research niche the company excels in. However when it came to the top consumer and retail stocks this year, the firm went larger cap, with five of their top picks, all of which make good sense for growth portfolios with more risk tolerance.
This has become the ultimate destination for the American consumer regardless of the economy. Costco Wholesale Corp. (COST) has a unique business model: It operates membership warehouses where the company buys the majority of its merchandise directly from manufacturers, essentially cutting out the middleman. Costco sells in bulk but also at a lower price, thus fueling its rapid growth. With consumers having more free cash to spend with gasoline prices still low, this major retailer may continue to see large revenue gains.
Costco remains one of the few conventional retailers where metrics like store traffic, market share gains and a validated model that could bode well in international growth and expansion. The company is largely unharmed by e-commerce, and it continues to add stores in strategically mapped out locations.
The Baird team cites the company's pricing authority on key items, the leading merchandising offering and the company's relatively new Costco co-branded card with Visa as real positives. The firm also points to the company's growing online presence.
Costco shareholders receive a 1.1% dividend. The Baird price objective for the stock is $180, and the Wall Street consensus target is $174.80 The shares closed yesterday at $163.67 apiece.
Jack in the Box
This company is a top fast-food offering for traders and investors to consider. Jack in the Box Inc. (JACK) operates and franchises Jack in the Box restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Eats, a leader in fast-casual dining, with more than 600 restaurants in 47 states, the District of Columbia and Canada.
To counter McDonald’s all-day breakfast promotion, the company recently launched its new all-day “brunchfast” menu on September 28, 2016. The menu features items such as the bacon and egg chicken sandwich, the brunch burger and the southwest scrambler plate.
Top analysts have cited the company’s favorable California exposure, accelerating return on invested capital and opportunity to see improving same-store sales at both brands in fiscal 2017 as more balanced promotional lineup and new food news moves the needle.
Shareholders are paid a 1.48% dividend. The $125 Baird price objective compares with the consensus target of $119.50. The stock closed Tuesday at $108.17.
The retail giant has traded sideways for the most part since this time last year and could be poised to breakout. Starbucks Corp. (SBUX) operates as a roaster, marketer and retailer of specialty coffee worldwide. Its stores offer coffee and tea beverages, packaged roasted whole bean and ground coffees, single-serve and ready-to-drink coffee and tea products, juices and bottled water.
The company also licenses its trademarks through licensed stores, as well as grocery and national foodservice accounts. The company offers its products under the Starbucks, Teavana, Tazo, Seattle's Best Coffee, Evolution Fresh, La Boulange, Ethos, Starbucks VIA, Starbucks Doubleshot, Starbucks Refreshers and Starbucks Discoveries Iced Café Favorites brand names.
Starbucks shareholders are paid a 1.71% dividend. Baird has set its price objective at $65, and the consensus target price is $64.73. The stock closed on Tuesday at $58.44 a share.
For the better part of the past three years, this company was a top momentum stock. A recent sell-off offers a favorable entry point. Panera Bread Co. (PNRA) is an upscale fast-casual chain with more than 2,000 stores in 45 states. Besides its fresh-baked bread, menu offerings include made-to-order sandwiches, salads and soups, pasta, flatbreads, as well breakfast items. Panera's system is 55% franchised and 44% company-owned. The company has developed into an industry leader in driving digital sales that increase restaurant sales capacity.
Fundamentals appear to be improving, with visible same-store sale drivers in place; however, some analysts have had questions about slower traffic trends in third quarter, which have appeared to be weighing on the stock recently. While most only expect modest final earnings growth for 2016, many think 15% or more growth is realistic for 2017 and that investors should reevaluate the likelihood that earnings per share estimates are too low.
The Baird price target is $248. The consensus target is posted at $237.70. The stock closed most recently at $213.55.
This one delivered big-time for investors over the past year and could be continuing higher in 2017. Ulta Salon Cosmetics & Fragrances Inc. (ULTA) operates as a specialty retailer in the United States. Its stores provide cosmetics, which include products for the face, eyes, cheeks, lips, nails and brushes; hair care products such as shampoos, conditioners, styling products and hair accessories and brushes; and salon styling tools comprising hair dryers, curling irons and flat irons.
The company also provides skincare and bath and body products, consisting of products for face, hands and body; fragrances; nail polish and nail care products; and men's skincare, hair care and fragrance products. Further, the company offers private label products consisting of Ulta branded cosmetics, skincare, bath and body products and hair care products, as well as other health and beauty products.
As of January 30, 2016, it operated 874 retail stores in 48 states. The company's full-service salon offers hair, skin and brow services, and it provides products through its website.
The whopping $315 Baird price target is higher than the consensus target of $301.95, as well as the most recent closing price of $268.81.
While these appear to be the absolute best companies to look at now, some have had big moves higher. Investors may want to buy partial positions here and see if we don’t get a correction in the first quarter.