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.
