The return of the back-to-school season represents potential strength for a number of sectors. Forecasters might point to consumer confidence or popular product trends as a way to predict demand. This kind of forecasting is a fool’s game, but it does not mean that opportunities are absent.
Clothing, apparel, and consumer electronics are only some of the product types that experience stronger demand at this time of the year. The questions investors should be asking are:
- What companies are selling products without sacrificing profit margins?
- What products must students have regardless of the health of the economy?
- What companies have not been bid up in anticipation of the strength in the back-to-school season?
The sectors to look at favorably are:
Services and Department Stores: List Average 1-Year Return: 35%
These companies are near 52-week highs, and might pull-back if demand during the back-to-school is weaker than anticipated:
1. Wal-Mart Stores Inc. (WMT, Earnings, Analysts, Financials): Operates retail stores in various formats worldwide. Market cap at $245.B, most recent closing price at $72.41.
2. Target Corp. (TGT, Earnings, Analysts, Financials): Operates general merchandise stores in the United States. Market cap at $41.79B, most recent closing price at $63.81.
3. Costco Wholesale Corporation (COST, Earnings, Analysts, Financials): Operates membership warehouses that offer a selection of branded and private label products in a range of merchandise categories in no-frills, self-service warehouse facilities. Market cap at $41.75B, most recent closing price at $96.57.
Companies that sold-off earlier in the year and have little expectation for out-performing are:
4. J. C. Penney Company, Inc. (JCP, Earnings, Analysts, Financials): Through its subsidiary, J. C. Penney Corporation, Inc., operates department stores in the United States and Puerto Rico. Market cap at $5.54B, most recent closing price at $25.30. The company recently reported poor results, cut dividends, and wrote-down inventory. Consumers did not respond well to its shift from offering discounts to everyday low pricing. The new store design, led by a former Apple (AAPL) executive is part of the turnaround plan. It offers a new experience for consumers, but boosting demand will take more time than just one quarter.
5. Best Buy Co. Inc. (BBY, Earnings, Analysts, Financials): Operates as a retailer of consumer electronics, home office products, entertainment products, appliances, and related services. Market cap at $6.07B, most recent closing price at $17.86. Best Buy is reeling from heavy competition from online retailers like Newegg and Amazon.com (AMZN). The company opened mobile-only stores in an effort to reduce rental costs and to maximize margins.
6. Aeropostale, Inc. (ARO, Earnings, Analysts, Financials): Designs, markets, and sells casual sportswear and other fashion merchandise under its own brands, principally targeted at customers 11 to 18 years old. Market cap at $1.11B, most recent closing price at $13.71.
Apparel Stores:
7. American Eagle Outfitters, Inc. (AEO, Earnings, Analysts, Financials): Operates as an apparel and accessories retailer in the United States and Canada. Market cap at $4.33B, most recent closing price at $22.04. This company’s upward trend in its share price began in August 2011 deservedly so because its products are resonating well with consumers.
8. Gap Inc. (GPS, Earnings, Analysts, Financials): Operates as a specialty retailing company. Market cap at $17.18B, most recent closing price at $35.11. Trading at a 52-week high, Gap has the right mix of products that helped generate strong earnings.
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Wal-Mart Stores Inc. (WMT, Chart, Download SEC Filings)
- Target Corp. (TGT, Chart, Download SEC Filings)
- Costco Wholesale Corporation (COST, Chart, Download SEC Filings)
- J. C. Penney Company, Inc. (JCP, Chart, Download SEC Filings)
- Best Buy Co. Inc. (BBY, Chart, Download SEC Filings)
- Aeropostale, Inc. (ARO, Chart, Download SEC Filings)
- American Eagle Outfitters, Inc. (AEO, Chart, Download SEC Filings)
- Gap Inc. (GPS, Chart, Download SEC Filings)
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