In a new report, Deutsche Bank analyst Paul Trussell discusses the firm’s top three retail stock picks for 2016. Trussell believes this year will be about all about the low-end retail segment.
“Our best ideas are proven winners in their sector, each outperforming peers on the top-line,” he explained. “We argue that these trends are sustainable and underappreciated at current multiples, especially with catalysts ahead.”
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Deutsche Bank’s first top pick, Foot Locker, Inc. FL has been a leader in the sneaker trend, which Trussell says is a secular, not a cyclical, trend. He sees major potential for margin expansion as well.
The firm’s second top pick, J C Penney Company Inc JCP, has finally begin to gain some market share momentum and has opportunity for margin expansion as well.
Finally, Deutsche Bank likes Costco Wholesale Corporation COST as a top retail stock pick. In addition to margin expansion opportunities, the firm sees revenue growth drivers such as organic food and a number of catalysts, including IT modernization and the transition to Visa.
Disclosure: the author holds no position in the stocks mentioned.
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