3 S&P 500 Stocks to Buy Before They Join the Party

Advertisement

S&P 500 stocks - 3 S&P 500 Stocks to Buy Before They Join the Party

Source: Horantheworld via Flickr (Modified)

It’s hard to believe with all the chaos surrounding Donald Trump’s White House that the markets are doing as well as they are, but the reality is that the S&P 500 has gained 10% since the Republican’s stunning victory through Feb. 24. Only John F. Kennedy’s post-election run is said to have produced a bigger gain for the index.

3 S&P 500 Stocks to Buy Before They Join the Party

Things are so good that the S&P 500’s total market cap went over $20 trillion in mid-February, a number that’s truly mind-boggling.

It seems like everything is headed higher; just 137 S&P 500 stocks are down over the last month and even fewer — 23 — are off by more than 10%.

Some of the 23 stocks could be in for more pain, including Fossil Group Inc (NASDAQ:FOSL) and Under Armour Inc (NYSE:UAA, NYSE:UA), which have both lost more than 20% due to poor earnings.

However, tucked in among the battered and bruised, I have three S&P 500 stocks to buy that should see smoother sailing in the weeks ahead.

S&P 500 Stocks to Buy: L Brands Inc (LB)

S&P 500 Stocks to Buy: L Brands Inc (LB)

No less than four analysts cut the 12-month target price of L Brands Inc (NYSE:LB) stock after it announced horrible earnings Feb. 23. The stock tanked losing almost 16% in one day’s trading.

Various issues plague the company from lower mall traffic to a Victoria’s Secret business that’s in the middle of being remade by L Brands CEO Leslie Wexner after long-time President Sharen Turney was let go in February 2016; replaced a few months later by Jan Singer, a former Nike Inc (NYSE:NKE) executive, L Brands should begin to show some life in the second half of 2017.

Investors shouldn’t be entirely surprised by L Brands’ downbeat forecast for 2017 earnings; it provided a clear hint that sales were slumping when it announced holiday sales in early January.

In addition, the company made it clear that its exit from the swim and apparel categories at Victoria’s Secret would take its toll on the business for the foreseeable future.

Bottom line: At the low-end of guidance, $3.05 full-year earnings per share provides a 2017 price-to-earnings ratio of 16.7, less than the S&P 500. LB stock hasn’t traded at this level on a consistent basis since 2013.

Les Wexner won’t drop the ball. This is one bet I’d gladly take.

S&P 500 Stocks to Buy: Mattel, Inc. (MAT)

S&P 500 Stocks to Buy: Mattel, Inc. (MAT)

Toys weren’t selling prior to Christmas and when that happens, retailers are forced to discount heavily in order to move the merchandise.

Mattel, Inc. (NASDAQ:MAT) CEO said in its Q4 2016 conference call Jan. 25 that toy sales were good over Black Friday, but declined by 7% year-over-year in the first three weeks of December and that meant lower gross margins in the quarter — down 300 basis points to 47%.

As a result, adjusted earnings dropped 19% in the quarter to $0.52 per share, 19 cents lower than analyst estimates. Ironically, industry experts suggest too many shopping days this past Christmas actually hurt sales.

Barbie’s comeback combined with the good work done by former CEO Chris Sinclair to stabilize the toy company after its previous chief executive was let go has laid the groundwork for better days ahead even though it probably doesn’t appear that way at the moment.

According to Morningstar analyst Jamie Katz, “The turnaround is going to occur in fits and starts, it won’t be a smooth process. The numbers don’t look terrible. It seems to be more about the willingness of consumers to spend in the period rather than the product.”

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

MAT’s customers will be back and with it, Mattel’s stock price.

S&P 500 Stocks to Buy: Michael Kors Holdings Ltd (KORS)

S&P 500 Stocks to Buy: Michael Kors Holdings Ltd (KORS)

In case you haven’t noticed retail is not exactly burning up the sales floors at the moment. My two previous choices have both experienced weaker business in recent months and Michael Kors Holdings Ltd (NYSE:KORS) is no exception.

It seems like every brand that has been hot the last few years is suddenly grasping for answers as if they’ve forgotten how to design merchandise customers want to own.

In the case of Michael Kors, it’s planning to reduce the amount of promotional activity it does here in North America in order to get average selling prices higher. That said, it too expects to suffer some weakness due to slowing mall traffic.

Kors, along with Coach Inc (NYSE:COH), sources say, has made it to the second round of the Kate Spade & Co (NYSE:KATE) auction. Kate Spade would likely do better in terms of profitability operated by Kors whose operating margins are much higher despite same-store sales declines in recent quarters.

With Kors stock down over 33% over the past year, now is a great time to be looking at its stock because any acquisition announcement, whether Kate Spade or some other brand, would likely inject some life into its stock.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/02/3-sp-500-stocks-to-buy-join-party-lb-mat-kors/.

©2024 InvestorPlace Media, LLC