How strong is retail going into 2016? Were a nation that loves shopping, and I think we always will. It seems the tills have beenringing merrily this Christmas and I dont think Ive seen the shops busier than this Boxing Day. Yeta lot of those sales have been made at the expense of margins as full-price selling proved tough aheadof Christmas and discounts have hit a high post-Christmas. But evenin worrying times for the retail sector,here are three retailers I think should have a great New Year.
Why, oh why is contrarian investing so difficult? In the depths of the Great Recession, the High Street was in tatters and retailers shares were plumbing the depths. But there were bargains to be had.
I correctly called the bottom for Dixons as it was then known, and predicted it would have a bright future. I even dared to suggest that this company could be the Next (LSE: NXT) of consumer electricals.
Four years on, I think Ive been proved right. Dixons Carphone (LSE: DC) as its known today, has gone from strength to strength. If Id had the courage of my convictions, I would have more than doubled my money, butI sold out too soon.
This company is now dominating a sector thathas seen the demise of Cometand Phones4U. And its expected to grow further as the consumer boom continues to build momentum.
A 2016 P/E ratio forecast to be 17.59, with a dividend yield of 1.96%, looks fairly priced for this growing business. Its not too late to jump on board.
Food for thought
Marks & Spencer (LSE: MKS) also suffered after the Credit Crunch, but since then its shares have been trending upwards. The rather odd thing is that this firm has been doing best in the food sector, which happens to be the most fiercely fought retail space in the country. Why is it so successful here? Well, just visit a Marks & Spencer Simply Food and sample the products and youll see why. Its arguably the best food store in the country, and maybe eventhe world.
Ive always argued that M&S can do better in terms of its clothing ranges, but even here its improving. And its taking theformula aroundthe world, leveraging the strength of the Marks & Spencer brand. Many store openings are now outside of its core domestic market.
Yet the company is very reasonably priced with a forecastP/E ratio of 12.80, and atempting dividend yield of 4.22%. This is a clear buy.
Next has been the casebook shopping success story of recent years. A once barely-profitable chain is now a world-leading business. Yet, although momentum has driven the share price to all-time highs, I think theres more to come from this firm.
The quality of its products is strongand Im a particular fan of its furniture ranges. Ive rarelyseen a better-laid-out store than my local Next Home. But, as with Marks & Spencer, theres perhaps little more room to grow in the UK.
So Next has also been expanding rapidly abroad. And with such a goodproduct offer, I expect this to drive further growth into the future.
Compared to M&S youre paying a premium for quality, but Next is still not overpriced at a predicted 2016P/E ratio of 16.48,with an enticing dividend yield of 5.51%.
It’s not often that you find a fast-growing sharethat’sboth consistent, and has momentum. Yet our experts at the Fool have unearthed exactly that.
It’s a well-known company with a strong track record and an impressive growth rate. And we at the Fool think it would make a tidy addition to your portfolio.
Prabhat does not own any of the shares mentioned in this article.