Our top stocks for the remainder of the year are nearly all tied to consumer spending in the U.S. Now, I know what you’re thinking: “Louis, aren’t you putting all your eggs in one basket!?”
But although many of these stocks are based on the American consumer, this is also the strongest sector of the economy. In addition, our stocks are diversified through various subsectors of consumer stocks, and many are conservative plays that do well even in a worst-case scenario for the economy.
Take a look back at the last time we took a major bet on the strength in the U.S. consumer, back in 2009 and 2010. We bought companies like online shopping site Amazon (NASDAQ:AMZN), telecom American Tower (NYSE:AMT), pharmaceutical AmerisourceBergen (NYSE:ABC), automaker Ford (NYSE:F) and satellite provider DirectTV (NASDAQ:DTV).
At the time, people were fearful that the U.S. consumer was dead, but we sold these five companies for better than 50% average gains in less than two years. This was also the time when we initiated big winners that we’re still holding—like our 200% gains in Apple (NASDAQ:AAPL) and Priceline.com (NASDAQ:PCLN).
And while some analysts were riled up over the latest retail sales report, a major drag was falling gasoline prices. Does the fact that prices at the pump are putting less of a squeeze on consumers’ pocketbooks really mean that the age of the American consumer is over? I don’t think so.
So without further ado, let’s take a deep dive into the best-of-the-best stocks for the rest of 2012 and the catalysts that will keep them firmly headed higher.
1) Ross Stores
Ross Stores (NASDAQ:ROST) has a downright enviable track record when it comes to accelerating monthly same-store sales — in May the bargain fashion chain reported an 8% jump in sales — leaving the 5.2% consensus estimate in the dust. And that is because Ross Stores is a lean, mean operating machine. Ross may have a smaller selection of products, but it is a smarter selection. While many of its competitors’ racks are overflowing with mismatched clothing, if you walk into one of the 1,000+ Ross locations, you’ll see a tight rein on inventory.
Another thing that I love about this company is that it is nowhere near reaching market saturation. America has been hit with bargain-hunting fever, so Ross could easily double its number of stores and accelerate its bottom line. This Conservative stock is a fantastic long-term buy.
2) Dollar Tree
Dollar Tree (NASDAQ:DLTR) is another double-dip resistant company. Even die-hard penny pinchers can’t argue with its $1 housewares, school supplies, health products and seasonal decorations. The company is also clearly in growth mode, adding 110 brand-new stores in the first quarter, and I expect Dollar Tree to maintain its title as the most successful single-price-point retailer in the U.S. for some time.
And for all of you who held off on buying this stock due to its triple-digit share price, now is your chance. This month, the company will halve its share price in a two-for-one stock split, which often helps attract additional buying pressure. Buy this Conservative stock.
Alexion Pharmaceuticals (NASDAQ:ALXN) is the biopharmaceutical company responsible for the most expensive drug in the world: Soliris, which costs patients a whopping $400,000 a year. But it is clear that doctors and patients recognize the value of Soliris.
First, the only alternative to Soliris if you have a life-threatening blood disorder is a painful and risky bone marrow transplant. Second, this sophisticated treatment is a result of $800 million spent over 15 years of development.
Sales of Soliris continue to climb, up nearly 50% in the first quarter, and analysts are calling for 41% sales growth and 28% earnings growth for the company in the coming quarter. Alexion is a one-of-a-kind pharmaceutical company with one-of-a-kind profit potential. Add shares of this Conservative stock under $99.
4) O’Reilly Automotive
O’Reilly Automotive (NASDAQ:ORLY) is one of the top auto parts retailers in the U.S., putting it at the crux of a major shift in consumer behavior: Americans are waiting longer than ever to replace their old cars. Did you know that the average car on the road is 10.8 years old? This means that American cars are in need of a tune-up, and from belts to A/C units to new tires, O’Reilly Automotive has it covered.
And O’Reilly Automotive stands out even compared with other auto parts chains: The company boasts the highest long-term growth rate and second-highest sales growth, earnings growth and return on equity in the industry. I recommend that you add shares of this Conservative stock.
5) Dollar General
Dollar General Corporation (NASDAQ:DG) is another major player in the discount store industry and there are just enough differences from Dollar Tree to make it a perfect complement to its competitor. Even though its not a true “dollar store”—it sells goods for as much as $10—this chain is still enjoying robust sales growth, especially in the American South and Midwest.
Dollar General is also definitely in expansion mode; the company opened 128 new stores and remodeled 224 stores in the last quarter. This brings the current store count over 10,000—making it significantly larger than Dollar Tree. With a $1 billion share repurchase program in the works, Dollar General is clearly committed to returning value to its shareholders in a big way. Buy this Conservative stock.
Altria Group (NYSE:MO) is the perfect high-dividend growth stock, boasting a whopping 5.1% dividend yield. The company dominates the U.S. cigarette market: just one of its brands—Marlboro—grabs 42% market share! Altria Group is also responsible for Virginia Slims brand cigarettes as well as Skoal smokeless tobacco and Ste. Michelle wine.
Because the company is well-diversified (tobacco accounts for 80% of sales), Altria is better equipped to handle the challenging regulatory environment than its competitors. And for all of you who held shares of MO on June 15, you’ll receive a quarterly dividend of 41 cents per share on July 14. This Conservative stock is a great buy.
Verisk Analytics (NASDAQ:VRSK) is a major player in the risk-management business, with dozens of industry awards under its belt. That’s because Verisk is known in the industry for providing value-added services for its clients at highly competitive prices.
Ever since Verisk went public in 2009, the stock has been on a steady climb and for good reason—the company has posted double-digit sales and earnings growth for each of the past seven quarters. The company recently pumped up its customer base to include the law enforcement industry through its new Crimes Analytics division with its extensive national crime databases and expertise in fraud detection. This Conservative stock remains a strong buy.
AutoZone Inc. (AZO) is another great stock because it is a larger and more conservative alternative to O’Reilly Automotive. With nearly 5,000 stores, AutoZone is the largest auto parts chain in the U.S., and the company is also extending its reach into the Mexican auto parts market, adding 10 new stores last quarter. This is a savvy move because Mexico’s roadways are full of cars that are 10 to 15 years old (and even older), so many drivers there are hungry for AutoZone’s replacement parts and do-it-yourself mentality. I consider this Conservative stock a great buy.
Apple (NASDAQ:AAPL) is one of my favorite companies right now, hands down. Most recently, Apple grabbed headlines due to its 2012 developers’ conference—rolling out a new ultra-thin MacBook laptop (complete with its revolutionary “Retina” display), iOS6 mobile operating system, Mountain Lion Mac operating software, and a slew of updates to the Siri personal assistant software.
With all of these developments, Apple is expected to continue accelerating sales and earnings at breakneck speed. Plus, the company will launch a dividend and a $10 billion stock buyback program later this year. Pick up this Moderately Aggressive stock.
10) Whole Foods
Whole Foods Market (NASDAQ:WFM) is the world’s largest natural and organic foods grocer, and with all of the recent concerns about childhood obesity and pink slime, consumers take notice. Whole Foods is able to charge more for its products because it goes a step further by ensuring that the brands it stocks are socially responsible.
The fact that shoppers can load up their carts with a clear conscience is one of the reasons that its same-store sales have been growing at a good clip as well. Looking ahead to the next quarter, Whole Foods is headed towards 14% sales growth and 22% earnings growth. Before its next earnings announcement, purchase shares of this Conservative stock.