5 Back-to-School All-Star Stocks

by Traders Reserve | August 27, 2012 7:00 am

When it comes to selling products on the retail level, two times of the year really stand out. The first is the holiday season, which kicks off each year with Black Friday, also known as the busiest shopping day of the year. The other time of year doesn’t have a specific launch date. Rather, it’s an entire season that begins in late July and early August and continues through Labor Day, when the need to go back-to-school shopping gets really serious.

Each year, retailers, online shopping sites and companies that sell school supplies like computers and electronics get a boost from the back-to-school buyer, and this year will likely be no exception. We’ve already seen strong retail sales in July, and though August sales could be slower than normal due to pressure in the drought-challenged farm-belt states, shoppers still will be fighting the crowds at malls throughout the country in an effort to get themselves and their kids outfitted for the classroom.

So, what companies are positioned best to take advantage of the seasonal shopping spree? Here are 5 back-to-school all-star stocks.

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1) TJX

One of my favorite retail analysts is Adrianne Shapira of Goldman Sachs (NYSE:GS[2]) . In a recent interview on CNBC, Shapira said that two trends would define this year’s back-to-school shopping season: value and brands. Value, as in consumers wanting to get the most for their limited dollars, and brands, as in the time-tested names consumers already know and trust. That means there are two types of companies that will likely do well—value oriented stores and the most trusted brand names.

In the former category is discount clothing/department store retailer T.J. Maxx[3], which is operated by parent TJX (NYSE:TJX[4]). The company, which also operates Marshalls and HomeGoods stores, saw a 7% surge in the all-important same-store sales metric in July. That was far better than most on Wall Street expected. This company is a profile in value offerings, but it also offers discounted brand-name items popular with consumers. TJX is perfectly positioned to take advantage of both the value trend and the brand trend.

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2) Ross Stores

RossLogo_185Like TJX, discount designer-label retailerRoss Stores (NASDAQ:ROST[5]) also reported a 7% surge in same-store sales. That number came along with a big jump of 12% in total revenue for the quarter ended July 28. Once again, Ross is a store that appeals to Shapira’s two cited trends: value and brands.

Like TJX, you get both with Ross Stores. Shoppers know that, Wall Street knows it, and investors need to know it. So far in 2012, ROST shares are up about 47%, but if the company experiences a strong back-to-school shopping season, those gains could be just the beginning.

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3) Nordstrom

Luxury retailer Nordstrom (NYSE:JWN[6]) had a great month in June, with an 8.1% increase in same-store sales for the five-week period ended June 30. The company saw same-store sales rise only 0.9% in July; however, that was well beyond expectations for a decline in the metric of 2.7%.

Nordstrom is the kind of store that offers top brands and top customer service[7] to the well-heeled consumer who isn’t extremely concerned with value, but who does love high-end brands. Nordstrom does, however, recognize that value shoppers are out there; it recently announced plans to add two new Nordstrom Rack outlet stores. Like TJX and Ross, Nordstrom Rack stores offer both value and brands. The cost of goods at Nordstrom Rack may be a lot more expensive than its deeper-discount competitors, but the principle of value and brands remains.

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4) Amazon.com

Amazon AMZNOnline retail giant Amazon.com (NASDAQ:AMZN)[8] is having another good year. AMZN stock is up nearly 34% year to date[9]. As any school kid can tell you, a big portion of back-to-school shopping these days is done on the internet, and that means it’s a busy time of year at Amazon.

As one who shops frequently for all kinds of items, I know that if something is hard to find, i.e. if I can’t get at a local store, I will check to see if I can get it via Amazon. Inevitably, I find what I’m looking for with only a few clicks of the mouse. This phenomenon has changed the face of retailing forever, and back-to-school shopping is no exception.

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5) Apple

If there’s a better company on the planet than Apple (NASDAQ:AAPL[10]), I would like to see it. The personal technology stalwart now has set a U.S. record as the company with the largest total market value[11] — over $623 billion. Apple got that way in large part due to intense demand for its Mac computers, iPad computing devices and iPhones.

Demand for Apple’s best-selling devices only intensifies this time of year, as high school and college students snap up the latest offerings from the geniuses in Cupertino, Calif. This year will be no exception, as demand for the highly anticipated iPad mini and iPhone 5, thought to be released in September, could keep Apple’s back-to-school season ripe well into the fall.

  1. Compare Brokers: https://investorplace.com/options-trading/broker-center/
  2. GS: http://studio-5.financialcontent.com/investplace/quote?Symbol=GS
  3. clothing/department store retailer T.J. Maxx: https://investorplace.com/2012/08/pricey-tjx-booms-on-bargain-brand-names/
  4. TJX: http://studio-5.financialcontent.com/investplace/quote?Symbol=TJX
  5. ROST: http://studio-5.financialcontent.com/investplace/quote?Symbol=ROST
  6. JWN: http://studio-5.financialcontent.com/investplace/quote?Symbol=JWN
  7. offers top brands and top customer service: https://investorplace.com/2012/08/new-rules-are-the-old-rules-invest-with-sense-t-vz-cl-clx-jwn-saks/
  8. AMZN): http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN)
  9. AMZN stock is up nearly 34% year to date: https://investorplace.com/2012/08/split-a-palooza-ko-dltr-aapl-amzn-pcln-ebm-cvx/
  10. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  11. largest total market value: https://investorplace.com/2012/08/apple-bests-13-years-of-market-cap-leaders-aapl-msft-ge-xom-intc-wmt-csco/

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