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3 Stocks to Consider as Retail Spending Slows

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The stock market saw tepid movement Friday after the US struck a phase one deal with China. The trade deal will include a rollback of some of the China tariffs and halts additional tariffs that were set to take effect Sunday.

The DJIA closed up 3 points, while the S&P 500 closed up 0.23 points and the DASDAQ Composite closed up 17 points.

US retail sales rose less than expected in November as Americans dialed back on their discretionary spending. Retail sales rose 0.2% vs the 0.5% that economic analysts expected, which worried some about consumer spending.

As Wall Street continues to assess the geopolitical landscape and the recent retail sector setback, investors can look to other sectors for stocks that can generate momentum in the upcoming year.

HealthEquity (HQY - Free Report) works with employers and plan providers to set up and maintain health savings accounts. The company's cloud-based software platform allows users to shop for medical products and services, make contributions, and invest the money in their accounts. HealthEquity collects fees from health plans and employers for its account services and also earns custodial fees on the assets in the accounts.

The company is coming off a strong third quarter where it saw its revenue skyrocket over 122% year over year to $157.1 million. The number of HSAs increased by 37% to 5 million and custodial assets grew 48% to $10.5 billion.

HealthEquity shares have jumped over 19% in 2019 and have climbed over 13% in December alone. Our Zacks estimates for HealthEquity’s current quarter call for sales to grow over 82% to $523.7 million and for earnings to climb over 18% to $1.41 per share. HealthEquity has seen its earnings estimates revised higher, helping earn HQY a Zacks Rank #1 (Strong Buy).

Applied Materials (AMAT - Free Report) is a semiconductor stock that has had a breakout year in 2019, with its shares up over 82%. The company provides a secular growth opportunity for investors as Applied Materials expects a boost in demand for its chip-making equipment as the rollout of 5G networks gains momentum. The market for 5G chips will hit $2.1 billion next year, before reaching nearly $23 billion in 2026, according to Allied Market Research estimates.

Applied Materials is in a great position to cash in on the shift as it is in the business of supplying fabrication equipment to the manufacturers that will be making those chips. The semiconductor company expects this growth opportunity to bolster its foundry and logic business, which supplies 58% of its total revenue.

Our Zacks consensus estimates for the firm’s current fiscal year forecast earnings to hike 24% to $3.77 per share and for net revenue to rally about 14% to $16.7 billion. Applied Materials pays out a quarterly dividend with a 1.39% yield. Applied Materials sits at a Zacks Rank #1 (Strong Buy) right now.

Goldman Sachs (GS - Free Report) has put together a strong year as its shares are up over 34% and have outpaced the broader investment bank industry’s 16.5% run. The company has weathered several crises and is still the top dealmaker and underwriter in the US. Goldman Sachs launched a consumer banking division called Marcus three years ago, which has yielded some strong results. 

Marcus is an online banking platform that specializes in unsecured loans and savings accounts. It has branches in the US and the UK, and clients can get loans of up to $30,000 for two to six years. Customers have flocked to the start-up, depositing $55 billion so far, and the bank has given out almost $5 billion in loans.

Goldman Sachs currently trades at a buyer-friendly valuation at 10.4X forward earnings, which is just below its industry average of 11.5X. GS stock also pays out a dividend with a solid 2.21% yield that can anchor shareholders in times of turbulence. With GDP rising higher than expected in Q3, Goldman Sachs could help investors cash in on this historic economic expansion.

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