Despite a poor revised second-quarter gross domestic product (GDP) number of just 1.8%, there are undeniable signs that the U.S. economy is starting to improve. The housing market is showing solid gains, despite a recent increase in mortgage rates, as demand is far outstripping supply in many markets. The consumer is also starting to show signs of improvement. This has been spotted by the Deutsche Bank A.G. (NYSE: DB) retail analyst team, who point out in a new report that the current condition index climbed to 99.7 from 93.8 in late June, the highest recorded since July 2007, supported by improvements in the stock market and housing market. They have combed their retail universe for stocks investors can buy now to take advantage of the improving economy.
Best Buy Co. Inc. (NYSE: BBY) is a love it or hate it story, depending on which Wall Street firms research you follow. New CEO Hubert Joly has worked hard to get Best Buy’s online sales up to higher levels and is shooting for double digits in the coming years. The Deutsche Bank price target for the big-box retailer is $31. The Thomson/First Call estimate is $30. Investors are paid a 2.3% dividend.
Lowe’s Companies Inc. (NYSE: LOW) has been a major benefactor of the impressive housing recovery. Its recent purchase of the assets of the bankrupt Orchard Supply Hardware store chain will improve its market position in California. Deutsche Bank has a $41 price target that is sure to be revised as the stock is trading above that now. The consensus price target is $46. Investors receive a 1.6% dividend.
Pier 1 Imports Inc. (NYSE: PIR) is a specialty niche retailer also benefiting from the improvement in the housing market. The company recently reported comparable-store sales growth of 5.9% and has just reached the anniversary of its e-commerce enabled site. It has seen its e-commerce contributions to total revenue make “progressive increases” since their launch, and it is investing heavily in that effort as an integral part of its plans. Deutsche Bank has a $28 price target on the stock, while the consensus is at $27. Investors are paid a small 0.8% dividend.
Tractor Supply Co. (NASDAQ: TSCO) has been red hot this year, hitting a 52-week high yesterday. The company sells tractors, but it also sells mowers, work clothes, welders, fencing, shelters, seeds and even chicks. It is a leading retailer of mail-order farm and ranch supplies. The Deutsche Bank target for this high flyer is $137, and the consensus target is much lower at $120. Investors receive a small 0.8% dividend.
Dick’s Sporting Goods Inc. (NYSE: DKS) shows up on many Wall Street firms lists of stocks to buy. The company is the largest full-line sporting goods retailer in the United States. Its national footprint boasts more than 520 general sporting goods stores and 81 Golf Galaxy stores. After a strategic re-evaluation that saw management decide to refocus on a smaller store universe, Dick’s now envisions a market opportunity of up to 1,100 stores. Deutsche Bank has a $57 price objective, and the consensus figure stands at $58. Investors are paid a 1.0% dividend.
Ross Stores Inc. (NASDAQ: ROST) is another very familiar name to buy at Wall Street firms. The company has focused on opening locations in community and neighborhood shopping centers in heavily populated urban and suburban areas with a large surrounding population of middle income households. This has proven to be a good strategy as the company has catered to women shoppers across a wide range of income levels and demographic base, which has helped grow revenues over 10% annually for the past five years. Deutsche Bank has a $70 target, and the consensus price target is at $71. Investors receive a 1.0% dividend.
TJX Companies Inc. (NYSE: TJX) is another off-priced retailer stock to buy. The company operates its stores under the T.J. Maxx, Marshalls, HomeGoods, Winners, HomeSense, T.K. Maxx and Sierra Trading Post trademarks. The company also sells its products through SierraTradingPost.com in the United States. Deutsche Bank has $55 price target, and the consensus target for the stock is at $55.50. Investors are paid a 1.1% dividend.
One thing investors may find interesting is Deutsche Bank’s list of stocks to buy is skewed more to the middle income American. Since they tend to retreat the most when economic times are difficult, they often have the largest amount of pent-up demand. This demand may continue to show up strong at the cash register for the rest of this year and into 2014 as well.