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5 Retail Growth Stocks Marching Ahead of the Market

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When we bet on a stock, we always try to hit the jackpot. But striking the right chord each time needs a fair amount of luck. A favorable event lures investors, while an unfavorable one drives them away from the market. A perfect example of this was recently witnessed when U.K.’s vote to exit the European Union roiled financial markets globally, greatly hurting investors’ sentiment. But since then the U.S. market has navigated brazenly through this rough tide, as it did in the past when China devalued its currency.

The Recovery Story

A glance at the real-time stock screen unveils that investors have downplayed Brexit-related fears, with the benchmark Dow Jones Industrial Average and S&P 500 gaining 5.5% and 5.7%, respectively, since Jun 28. However, analysts believe that although the market has recouped much of the losses, it is yet to breathe a sigh of relief. Nevertheless, favorable data clearly suggests that the economy is on a recovery mode.

As per the Labor Department, the economy added 287,000 jobs in June. The recent job data painted a rosy picture of the labor market, indicating that the economy has absorbed seismic shocks and the market turmoil. Positive economic data showing a rapid improvement in the U.S. manufacturing activity in June on the back of new orders and increased output and exports also lifted spirits. The Institute for Supply Management informed that the manufacturing index increased to 53.2 last month from 51.3 in May.

How the Fed Would React

Well, the Federal Reserve has been surely keeping a close watch on the ongoing economic activities. Market experts believe that although strong job creation and wage growth give them a reason to ponder over a rate hike in September, they may not be in a rush and will only arrive at a decision after considering all the relevant factors.

Last December, the Federal Reserve raised interest rates for the first time in almost a decade to a range of 0.25%−0.5%, and the market was bracing for another quarter-point increase in July this year.

Growth Stocks Now a Safe Haven

It is quite apparent that the market has witnessed a slew of events and it would be difficult to fetch higher returns amid such an investment climate. Instead of waiting for a convincing economic environment, be a front-runner by identifying stocks that have the potential to outperform even when market conditions are not congenial. Investors try to focus on adopting strategies to ascertain above-market returns. Thus, to stay ahead of the curve, they need to pick stocks with strong growth potential.

To make the task easy, Zacks has designed the new Style Score System. With the help of this system, we have identified stocks with a Growth Style Score of “A” (or “B”). Our research shows that stocks with Growth Style Scores of “A” (or “B”) when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer the best upside potential. Moreover, these stocks have gained over 10% year to date and outperformed the major indices. So far in the year, the Dow Jones Industrial Average has climbed about 5.4%, while the S&P 500 has gained approximately 5.3%.

5 Retail Stocks You Should Chase

The Children's Place, Inc. (PLCE - Free Report) , a children's specialty apparel retailer, is a solid bet. It flaunts a Zacks Rank #1 with a Growth Score of “A” and a long-term earnings growth rate of 10.3%. Shares of this Secaucus, NJ-based company have surged about 50% year to date.

Investors can count on Dollar Tree, Inc. (DLTR - Free Report) , which operates discount retail stores in the U.S. and Canada. The stock carries a Zacks Rank #2 and a long-term earnings growth rate of 17.5%, with a Growth Score of “A”. Shares of this Chesapeake, VA-based company have gained approximately 22% so far in the year.

We also suggest investing in Burlington Stores, Inc. (BURL - Free Report) , which carries a Zacks Rank #2, a Growth Score of “A” and a long-term earnings growth rate of 17.7%. Shares of this Burlington, NJ-based retailer of branded apparel products have increased approximately 55.6% year to date.

Another stock that investors may look forward to is ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA - Free Report) , with a Zacks Rank #2, a long-term earnings growth rate of 19.5% and a Growth Score of “A”. Shares of this Bolingbrook, IL-based specialty retailer of cosmetics, fragrance, haircare, skincare, bath and body products, have advanced 35.2% so far in the year.

Last but not least is Dollar General Corporation (DG - Free Report) , a discount retailer. It carries a Zacks Rank #2 and a long-term earnings growth rate of 14.9%. Shares of this Goodlettsville, TN-based company have jumped about 28.6% year to date. Moreover, the stock has a Growth Score of “A”.

Endnote

While these five stocks are not the end of the road, with the help of the Zacks Stock Screener and permutation and combination, you can find out stocks that have the potential to beat the market.

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 >>

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