Market Monitor: Mariann Montagne’s Picks

Mariann Montagne
Portfolio Manager at Gradient Investments

Market Take:

We’re constructive on US stocks for approximately 10% earnings growth and price appreciation over the next 12 months. Today’s September jobs report was encouraging, especially given the upward revisions to prior months. 

Theme:

With high employment and wage growth, together with good consumer confidence, we’re still positive on consumer spending for discretionary goods, and believe the upcoming holiday season could see a 5% gain.  However, the consumer needs to perceive value. 

Stock picks:

Dollar General (DG)  – Dollar General is putting up good comparable store sales growth, consistently beating expectations while they’re adding 6% more stores this year.

Our outlook for 11% earnings growth next year may prove conservative if we get some tariff resolution with China.

Five Below (FIVE) – Five Below is an on-trend discount store for kids and adolescents which is growing faster in terms of new locations growing in the 20% area with comp store growth in the 3% area. 900 stores by year end vs. 17,000 for DG.

We’re looking for 20% growth in the coming year, p/e to hold so 20% upside to the stock price today.

TJ Maxx (TJX) – TJ Maxx is an omni-channel discounter of mostly apparel & accessories. Likely to continue gaining market share due to its value offering.

We believe estimates are low and could see 10% EPS growth over the next 12 months. Pays a 1.7% dividend

Disclosures:   Gradient Investments own DG & FIVE for clients.

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