5 Retail Growth Stocks To Withstand Market Gyrations

Betting on a stock is more like an attempt to hit the jackpot. But one needs a fair amount of luck for it to work every time. So, how to go about it? Instead of being a mute spectator and waiting for a convincing investment scenario, one should try and identify stocks that have the potential to outperform even when market conditions are not congenial.

Of late, major indices have fallen prey to weaker-than-expected March employment data, President Donald Trump’s airstrike against Syria and a decline in U.S. Manufacturing Purchasing Managers' Index to 53.3 in March from 54.2 in February, signaling concern over the economic outlook.

Trump’s failure to keep his campaign promise of revamping U.S. healthcare was also a major setback and raised doubts as to whether he will be able to give shape to his revolutionary ideas that had led markets to new highs. Further, the notes of Fed’s March meeting unveiled that policy makers are contemplating on paring the balance sheet that has inflated to approximately $4 trillion of government- and mortgage-backed bonds. This did not go well down with investors.

We note that the Dow Jones Industrial Average, S&P 500 and NASDAQ declined 1.1%, 0.83%, and 0.15%, respectively, in the past month.

Where to Focus?

Target “Growth Stocks”. These are generally hot and flourishing stocks with earnings growth potential. Among the 16 Zacks categorized sectors, we are focusing on Retail-Wholesale today. The sector has gained 8.1% so far in the year and has comfortably outperformed the S&P 500 index that advanced 5.2%.

The recent rebound in oil prices, decelerating unemployment rate (4.5% in March) and a gradual improvement in the housing market signal that the economy is on a recovery mode. Undoubtedly, the retail sector presents itself as a lucrative investment hub amid such a backdrop. These factors are playing a crucial role in raising buyers’ confidence. U.S. consumer confidence leaped in March to the highest level since Dec 2000 amid growing labor market optimism.

We expect this positive sentiment to translate into higher consumer spending, which accounts for about two-thirds of the U.S. economic activity. Personal consumption expenditures in the fourth quarter of 2016 improved 2%, while the U.S. economy expanded at an impressive rate of 2.1%. Although consumer spending inched up 0.1% in February, following a 0.2% jump in January, it does not indicate that the economy is devoid of momentum.

All these factors call for investing in some rock solid stocks that have the potential to touch new highs as validated by their Zacks Style Scores.

5 Prominent Picks

Here we have highlighted five Retail/Wholesale stocks that have a favorable combination of a Zacks Rank #1 (Strong Buy) or #2 (Buy) with a Growth Score of “A” or “B”. These stocks are backed by sound fundamentals, surging share price and a track record of better-than-expected results. Not only this, these stocks have outperformed their respective industries.

We suggest investing in The Children's Place, Inc. (NASDAQ:PLCE) , with a long-term earnings growth rate of 8% and a Growth Score of “A”. In the past six months, the stock surged roughly 50.3% and outperformed the Zacks categorized Retail-Apparel/Shoe industry, which declined 18.3%. This specialty retailer of children's apparel delivered an average positive earnings surprise of 39% over the trailing four quarters and flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another stock worth considering is Best Buy Co., Inc. (NYSE:BBY) , which has a long-term earnings growth rate of 10.5% and a Growth Score of “A”. This retailer of technology products, services, and solutions delivered an average positive earnings surprise of 27.7% in the trailing four quarters and carries a Zacks Rank #1. We note that in the past six months, the stock advanced approximately 22.2%, while the Zacks categorized Retail-Consumer Electronic industry gained 17.8%.

Investors can count on Rush Enterprises, Inc. (NASDAQ:RUSHA) , an integrated retailer of commercial vehicles and related services with a long-term earnings growth rate of 15%. The company posted an average positive earnings surprise of 12.8% over the trailing four quarters and has a Growth Score of “A”. In the past six months, this Zacks Rank #1 stock exhibited a bullish run and surged 54.8%, while the Zacks categorized Retail/Wholesale Auto/Truck industry gained 0.6%.

Darden Restaurants, Inc. (NYSE:DRI) , which owns and operates full-service restaurants, is a solid bet, with a Zacks Rank #2 and a Growth Score of “A”. The company posted an average positive earnings surprise of 3.4% in the trailing four quarters and has a long-term earnings growth rate of 10.4%. The stock surged 33.4% in the past six months and comfortably outperformed the Zacks categorized Retail-Food & Restaurants industry, which increased 4.6%.

You may also consider Bob Evans Farms, Inc. (NASDAQ:BOBE) , which owns and operates full-service restaurants under the Bob Evans Restaurants brand. The stock carries a Zacks Rank #2 and has a Growth Score of “A”. The company posted an average positive earnings surprise of 12.7% in the trailing four quarters and has a long-term earnings growth rate of 11%. In the past six months, the stock displayed a fabulous bull run on the index and rose 62.5%, while the Zacks categorized Retail-Food & Restaurants industry increased 4.6%.

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