Europe is righting itself, the U.S. is slowly building a sustained recovery, China and Japan are no longer weakening.
This is very good news for smart national and multinational brand consumer stocks. Each of these companies I’ve chosen is a major player in its respective sector — and each knows how to best keep its brand front and center in the minds of consumers.
While all of them have done a very good job muscling through the tough economic slog we’ve endured for nearly a decade, now that growth is showing some sustainable “green shoots” these companies — and their stocks — have some serious upside potential.
They make a diverse group, but they share an important quality — a deep understanding of their customers and a commitment to provide them with the best experience and products they can.
This is what got these consumer stocks through the tough times and it’s what’s going to take to leverage their success as the better times arrive around the globe.
Let’s look at these seven consumer stocks that are primed for growth:
7 Consumer Stocks Primed For Growth: Disney (DIS)
Disney (DIS) is a prime example of a global brand that shrewdly navigated the dangerous waters of world recession. Over the decades, DIS has managed to build a robust multifaceted empire that includes theme parks, movies, gaming, retail shopping and more.
When theme parks languished during the recession, DIS could focus on other parts of the business to pick up the slack. But it’s now looking like the theme parks are back, as families around the world are willing to spend what it takes to have the Disney experience. And Disney’s long-term vision is Asia.
Next spring, DIS plans to open a new theme park in Singapore, and continues its commitment to a $5.5 billion park for Shanghai even as Chinese markets roil in stock market turmoil. CEO Bob Iger is “extremely bullish” on Asia in the long term.
The new Shanghai park will have 330 million potential visitors within a three-hour drive. That’s a winning formula.
7 Consumer Stocks Primed For Growth: Nike (NKE)
Another iconic global brand is Nike (NKE). And just like its entertainment brethren, NKE is the dominant name in the sports shoe and apparel sector.
This juggernaut continues to expand its brand in both developed and emerging markets, even going after its competitors’ most sacred niches. For the fiscal year ended May 31, NKE grew sales 10% for the year — a pretty tough year for most economies and consumers if you recall — and sales weren’t hurt by the strong dollar.
Sales in Western Europe were up 21% and China sales were up 19% — two of the hottest regions for NKE despite economic struggles in both regions. That bodes very well for the future as these economies get back on track again.
Direct to consumer sales were up almost 30% for the year and with them, gross margins also increased.
All this is very good news in a tight market and it’s no surprise the stock is up 45% in the past year. Just bear in mind it’s holding a price-to-earnings ratio of 30 now, so it’s fully priced. But given its record of success, healthier global growth should boost those earnings pretty quickly.
7 Consumer Stocks Primed For Growth: Target (TGT)
On the domestic side, Target (TGT) has been metaphor for the U.S. economy in general as it retools and and remakes itself into a more dynamic and competitive 21st century discount retailer.
Many didn’t expect that CEO Brian Cornell, who has been on the job for less than a year, could turn around the No. 3 retailer in the U.S. this quickly.
It’s certainly not for lack of trying. Cornell has moved aggressively into the e-commerce space where Amazon (AMZN) and Walmart (WMT) were eating its lunch. And that meant getting customers to actually trust the company with their financial details again after the massive security breach in 2013.
He streamlined the bureaucratic harrumphing that was turning its “cheap chic” image into tired togs, and he moved more aggressively into the healthcare space that had been the dominion of WMT.
He shut down Target operations in Canada, where the company had racked up $2 billion in losses.
Cornell is getting it done and it’s paying off faster than anticipated. Earnings for the quarter came in at $1.10 a share — analysts were predicting $1.02. Revenue increased 2.8%. Same-store sales were up 2.3%, meeting expectations. The number of transactions and the value of those transactions each increased.
And it raised guidance for the rest of the year.
On top of all this, Target kicks off a sweet 2.6% yield. Take that, WMT and AMZN.
7 Consumer Stocks Primed For Growth: L Brands (LB)
Speaking of sweet and yield, L Brands (LB) — owner of upscale brands Bath & Body Works, Victoria’s Secret, PINK, La Senza, Henri Bendel — also has a nice 2.3% yield.
The most iconic of its brands is of course Victoria’s Secret, which is a marketing machine. From its annual star-packed televised fashion show that complements the Super Bowl to its provocative ads, its visibility is broad.
And with its PINK stores, it’s now able to gain access to a younger audience and move them through the entire brand group. PINK is for younger teens and Millennials that are looking for a hip fashion statement without a premium price.
In recent quarters LB’s Bath & Body Works has been the most successful segment with comparable sales up 6% last quarter. June same-store sales were up 3%.
Margins rose across the brands and inventory per square foot was down in it stores.
As consumers have more money in their pockets, they’ll be looking to splurge or simply buy more premium products. LB is in prime position to capitalize and this sector will be leveraged to a stronger economy. And right now it’s well priced given its growth potential — and its nice dividend.
7 Consumer Stocks Primed For Growth: Dollar General (DG)
Dollar General (DG) is one of the top dogs in the discount retail space.
During tough times, it was taking market share from big-box discounters like WMT, since its smaller stores have meant DG can expand into markets that weren’t directly served by a big regional Walmart store.
Convenience is a big deal, especially when you’re working to pay the bills and take care of the kids. For many items, it’s a lot easier to head downtown to a DG store than spend 30 minutes going to and from a big Walmart. And now that it has grown its customer base, these new habits are continuing with its customers.
Also, DG is continuing its expansion. This plays right into the pushback from consumers and big-box retailers. Staying local — even with a chain like DG — just makes more sense. The company has opened 219 new stores in the first quarter and is on track to open 730 stores during the fiscal year.
Given that 85% of its stores’ comps were up in the past year, more stores means more revenue. That could be why Citigroup analysts just raised their target on the stock to $94. It currently trades near $80, so that’s a pretty big move by the end of the year.
7 Consumer Stocks Primed For Growth: Lowe’s (LOW)
One of the key indicators that the U.S. economy is improving is the housing sector. When sales start to grow and builders start to build, it usually signals that consumers are looking for long-term financial commitments and banks are willing to finance them, as well as builders.
And when banks are feeling better about lending, it also means current homeowners look to put their equity to work by investing in new remodeling projects.
Either way, Lowe’s (LOW) is a big beneficiary.
And these housing trends, while slightly bullish, have a long way to go to reach the levels they were at when the real estate market was booming.
Now, it’s unlikely we’ll get back to those heady times (and that’s probably a good thing) but there is still plenty of growth left in this sector for LOW.
The stock has recently seen some strong money inflow from institutional investors, which is likely early positioning for the next big growth in coming quarters.
7 Consumer Stocks Primed For Growth: Darden Restaurants (DRI)
When you have a few extra dollars in your pocket, who doesn’t spend up a little when they go out to eat?
And that’s precisely what Darden Restaurants (DRI) is banking on.
DRI sold its legendary Red Lobster chain but has used the money to up its game in the brands it still maintains, Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V’s Prime Seafood, Wildfish Seafood Grill and Yard House.
While some are at lower price points, it has a number that are high-end establishments.
This is a smart portfolio, especially when diners are looking for value on the lower end and on the upper end are willing pay up for unique, quality experiences.
What’s more, as business spending ramps up, the higher-end properties will see more business lunches and dinners.
DRI has been on a tear of late, up almost 25% year to date and up 65% in the past year. Some of that has been its recovery from its Red Lobster days but now the momentum is certainly on its side.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool,PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
