A+ Stocks for Back to School - Investment Ideas

Just when everybody starts having fun, the party is about to end. That's what every single 12 yr. old in the country is thinking right now as another school year lurks around the corner.

Ya, it's a bummer kid, but here's the up side; it's time for Mom and Dad to spend a little money on you, so be sure to take a few liberties when you have the chance.

Time For Some New Gear

Make sure you communicate to your parents that your list of necessities is both long and distinguished. You gotta get some new shirts, couple pairs of pants, definitely a new pair of shoes. Oh ya, don't forget the books, there's going to be studying involved in this process too; you're probably going to need some notebooks, a calculator, a couple packs of pens, maybe a new backpack.

When you add it all up we are talking about a serious outlay, where a middle-class family can easily spend $500 a piece on Timmy and Suzy to make sure they go back to school in style. Throw a laptop in there anywhere and tack on another $800 to $1000.

So as you can see, this game of back to school is serious business for the retailers, and after we take a look at the numbers, it's easy to see why.

Back to School Is Serious Business

Back to school is the second largest revenue pull for the sector, right behind the almighty holidays, with revenue this year expected to top $55 billion, a 16% increase from 2009.

But even though sales volumes are expected to rise, the competition will be fierce as the group continues to battle a weak consumer, the top end of a margin cycle and each other with some very highly publicized pricing wars between a number of big-name players.

So with that in mind, here are four retailers that look well positioned to cash in on the annual spending bonanza known as "Back to School."

4 Back to School Stocks

Target Inc. (TGT) is a back to school cornucopia, carrying everything from pencils and pens to pants and shirts that make it a potential one-stop shop for even the most demanding back to school shoppers. The company has a solid 12% average earnings surprise over the last four quarters to go along with its discounted P/E of 13X against its peers 17X. On the chart, shares have enjoyed a big bounce over the last year as the consumer environment has improved, take a look below.

Bed Bath and Beyond (BBBY) is a great place for college-bound students to pick up big savings on new sheets and towels. The company has also been hot over the last year, with its share price more than doubling from its 2009 low. The next-year estimate is bullish, projecting 13% earnings growth, take a look at the chart below.

Apple, Inc. (AAPL) is probably the hottest company on the Street right now, posting unbelievable Q2 results in early July that contained a 14% earnings surprise on a 61% increase in revenue. This is the go-to company for young consumer electronics aficionados with its iPhone, iPod and iPad and Mac books topping the charts of popular devices for the back to school crowd. Take a look at the chart below for this Zacks #1 rank stock.

Office Max, Inc. (OMX) is another back to school hot spot, providing both schools and students alike an opportunity to load up on supplies at discounted prices. The company has recently seen a big turn in its earnings profile, rebounding from a Q4 loss with strong first and second quarter performances. That trend is expected to continue, with the next-year estimate projecting 40% earnings growth. On the chart, shares have pulled back a bit recently, but the long-term trend is still bullish, take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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