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5 Retail Stocks Well Tailored for Your 2016 Portfolio

The U.S. economy is largely healed and ready to accelerate in 2016. The message was loud and clear, when the Federal Reserve raised the interest rate for the first time in nearly a decade by a quarter percentage point to 0.25-0.50%. This marked the end of the accommodative monetary policy undertaken when the economy slipped into recession and the beginning of a slow-but-steady series of rate increases.

Market experts believe that the economy has shown considerable strength and is more balanced now to withstand headwinds such as overseas growth turmoil, weakening of foreign currencies and sluggishness in the energy sector. They anticipate the U.S. economy to expand at a rate of 2.1% in 2015 and 2.4% in 2016. The economy looks firm on its recovery path and has enough steam to carry the momentum.

Retail Sector Holds the Baton

Given the underlying economic strength, the retail space is bubbling with optimism. A gradual recovery in the housing market, along with lower gasoline prices, and an improving labor market - with the unemployment rate hovering around 5% - are playing key roles in raising buyers' confidence. We expect this positive sentiment to translate into higher consumer spending, which accounts for over two-thirds of U.S. economic activity.

The U.S. economy created a total of 211,000 jobs in November, beating the consensus estimate of 199,000. Moreover, October's job numbers were revised upward from last month's reported figure of 271,000 to 298,000. Hiring was also broad-based in November, with the energy sector being the lone exception. November's job gains have pushed up the average monthly jobs growth to 210,000 so far this year.

5 Stocks to Invest Your Money

So it is time you rejuvenate your portfolio, as you head into 2016. We have identified five Retail-Wholesale stocks based on their favorable Zacks Rank #1 (Strong Buy) or #2 (Buy) + their expected long-term earnings per share growth rate of 10% or more. A favorable rank indicates positive estimate revisions by analysts who are optimistic on the future performance of the company.

We suggest investing in Shake Shack Inc.SHAK , which sports a Zacks Rank #1 and has a long-term earnings growth rate of 27.5%. This New York-based company delivered an average positive earnings surprise of 134.5% over the trailing four quarters. This operator of Shake Shack restaurants is expected to witness earnings growth of 99% in 2015 and 18.3% in 2016. The Zacks Consensus Estimate has moved up over the past 60 days.

American Eagle Outfitters, Inc.AEO is another solid bet, with a Zacks Rank #1. The Pittsburgh, PA-based company delivered an average positive earnings surprise of 16.7% over the trailing four quarters, and has a long-term earnings growth rate of 10%. The company is expected to witness earnings growth of 71.4% in fiscal 2015 and 6.4% in fiscal 2016. The Zacks Consensus Estimate too has been trending up over the past 30 days.

Investors can also count on BJ's Restaurants, Inc.BJRI , the operator of casual dining restaurants that carries a Zacks Rank #1 with a long-term earnings growth rate of 20.1%. The Huntington Beach, CA-based company delivered an average positive earnings surprise of 30.6% over the trailing four quarters. The company is expected to witness earnings growth of 61.4% in 2015 and 20.1% in 2016. The Zacks Consensus Estimate too has trended upward over the past 60 days.

Another stock that investors may look forward to is Foot Locker, Inc.FL , with a Zacks Rank #2 and a long-term earnings growth rate of 12.1%. The New York-based company delivered an average positive earnings beat of 11.2% over the trailing four quarters. It is expected to witness earnings growth of 19% in fiscal 2015 and 11.4% in fiscal 2016. The Zacks Consensus Estimate too has been on the rise over the past 60 days.

Last but not least is Amazon.com, Inc.AMZN , with a Zacks Rank #2 and a long-term earnings growth rate of 35.6%. This Seattle-based online retailer delivered an average positive earnings surprise of 148% over the trailing four quarters. It is expected to witness massive earnings growth in 2015 and 2016. The Zacks Consensus Estimate too has been on the rise over the past 60 days.

Bottom Line

The above stocks hold promise and excellent prospect with healthy fundamentals. We wish the addition of these five stocks turn out a bonanza for you. Merry Christmas and a Prosperous New Year!

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 >>

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

AMAZON.COM INC (AMZN): Free Stock Analysis Report

BJ'S RESTAURANT (BJRI): Free Stock Analysis Report

AMER EAGLE OUTF (AEO): Free Stock Analysis Report

FOOT LOCKER INC (FL): Free Stock Analysis Report

SHAKE SHACK INC (SHAK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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