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Best Buy & 3 Other Retail Stocks for Growth-Greedy Investors


Barring a few hiccups, the U.S. stock market has displayed a decent run in an economy that witnessed a rise in the benchmark interest rate, recorded sharp rise in U.S. factory activity in June, saw oil prices lose ground and encountered political gridlock. We note that the Dow Jones Industrial Average has advanced 9%, the S&P 500 has gained 9.1%, while the tech-laden Nasdaq Composite Index has surged 16.3% so far in the year.

The buoyant market provides an ideal opportunity to boost your portfolio by adding 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. The sector has gained 14.3% so far in the year and has comfortably outperformed the S&P 500 index.

The rebound in oil prices from all-time lows, improving labor market and gradual recovery in the housing market signal that the economy is on a recovery mode. These factors are favorable for retailers. On the other hand, steady job additions and gradual wage acceleration offer a perfect background to drive consumer confidence. We expect this positive sentiment to translate into higher consumer spending that may help revive sales in the current retail landscape that is witnessing a sea change with the focus gradually shifting to online shopping.

As a result, retailers are now concentrating more on enhancing their omni-channel capabilities, optimizing store fleet and restructuring activities. Best Buy Co., Inc. BBY is one of those retailers who are making extensive investments to upgrade operations with special focus on developing omni-channel and strengthening partnership with vendors. The company also launched a fresh strategy called “Best Buy 2020: Building the New Blue” to explore and pursue growth opportunities and optimize cost with focus on key areas.

These initiatives have led shares of this Zacks Rank #1 (Strong Buy) company 25% higher year-to-date. The stock has outpaced the Zacks categorized Retail-Consumer Electronic industry’s gain of 20%. We believe this retailer of technology products, services, and solutions with long-term earnings growth rate of 11.8% and a Growth Score of “B” appears a lucrative option.

3 Other Prominent Growth Picks

Here we have highlighted three other Retail/Wholesale stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) and 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 McDonald's Corporation MCD, with a long-term earnings growth rate of 9.3% and a Growth Score of “A.” So far in the year, the stock has surged roughly 28.7% and outperformed the Zacks categorized Retail-Food & Restaurants industry, which advanced 10.8%. This restaurant operator has delivered an average positive earnings surprise of 7% over the trailing four quarters and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another solid bet is The Home Depot, Inc. HD, which has a long-term earnings growth rate of 13% and a Growth Score of “A.” This home improvement retailer delivered an average positive earnings surprise of 3.5% in the trailing four quarters and carries a Zacks Rank #2. We note that year to date, the stock has advanced approximately 13.8%, while the Zacks categorized Building Products – Retail/Wholesale industry has gained 10.2%.

You may also consider Conn's, Inc. CONN, a specialty retailer of durable consumer goods and related services. The stock holds a Zacks Rank #2 and has a Growth Score of “A.” The company posted an average positive earnings surprise of 80.9% in the trailing four quarters and has a long-term earnings growth rate of 18.5%. So far in the year, the stock has displayed a fabulous bull run on the index and has risen 47.8%, while the Zacks categorized Retail-Consumer Electronic industry increased 20%.

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