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.
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.
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.