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To celebrate the holidays, we here at the Fool are devoting extra virtual ink to all things consumer-focused in a special section called "The 12 Days of Christmas." Over the coming week, we'll have our "12 Days of Content" surrounding consumer-focused names that look set to profit or perish from the holiday cheer.
Overseas economies are expected to outpace the U.S. next year. According to Morgan Stanley, global economies should grow 4% on average next year while advanced G-10 countries will see barely 2% expansion. The developing world should be the main driver, with China exceeding 10% next year, India growing 8%, and both Russia and Brazil expected to expand by some 5% on average.
While that sounds hopeful for Chinese telecom provider China Mobile (NYSE: CHL ) or Russia's oil giant, Gazprom, there can be a lot of risk built into emerging-market stocks.
It only takes a pinprick
In Russia you run the risk of the government seizing your investment, and China's growth has been over-aided by a massive $586 billion stimulus plan. That's causing anomalies in the marketplace, with numerous Chinese industries overheating. Steel, petroleum, chemicals, glass, and even office buildings and luxury malls are growing at a torrid rate.
These effects of China's stimulus program offer some very good reasons to be concerned about investing in the Asian nation.
A more satisfying meal
So where should an investor turn? Even if China's economy is expected to outperform America's next year, that doesn't mean investors can't find excellent opportunities in the good ol' U.S. of A.
So here are six stocks for 2010 that will be better than China and won't leave you hungry for more later on.
The lessons learned in the Great Recession will stick with consumers for some time. Whether recovery is delayed or comes next week, Wal-Mart Stores' (NYSE: WMT ) low-cost proposition will continue to ring the register in 2010. Moreover, international sales were up 12% last quarter on a constant currency basis, so if global economies are going to shine next year, Wal-Mart will be rolling right alongside.
Department store chain Kohl's (NYSE: KSS ) has also found the right mix of product, style, and price that's allowed it to surpass the performance of J.C. Penney, Macy's, and even Target. Same-store sales rose 3.3% in November, ahead of analyst expectations of just 1% growth, while total sales were up more than 7% for the four-week period. Year-to-date comps are off just 1% compared to a greater-than-7% decline at some rivals. An improving economy will likely improve Kohl's bottom line, too, and at 15 times forward earnings, the midtier retailer looks to be in some fine threads.
Jos. A. Bank
Speaking of being all dressed up, men's suit seller Jos. A. Bank Clothiers (Nasdaq: JOSB ) is also a play on the nascent recovery. Even through the recession it's posted 14 consecutive quarters of profit that are higher than in the year-ago period. Now it's taking advantage of low lease rates on building space and will open 30 to 40 new stores in 2010, compared with the 10 to 15 it plans to open this fiscal year. At just 10 times forward earnings and with analysts expecting 12% future growth, Jos. A. Bank looks to be a well-tailored investment.
If business is going to grow next year, it's going to need supplies. More and more, that means they'll be buying them from the top office supply chain, Staples (Nasdaq: SPLS ) . Its integration of Corporate Express is virtually complete in the U.S., and though it sports thinner margins, the new unit gives a huge delivery footprint on top of the bricks-and-mortar base. OfficeMax with its heavy debt load and Office Depot's turn to private equity partners to cope with the recession means they can't effectively compete against the nimble office supply giant.
Bed Bath & Beyond
I'm no housing bull, but it's hard to ignore the extraordinary lengths the government's going to keep the good times rolling. And a better housing market is going to lead to greater demand for furnishings, meaning Bed Bath & Beyond (Nasdaq: BBBY ) is likely to see more sales, particularly since its ertswhile primary competitor, Linens 'n Things, no longer exists. Further, expansion into Canada -- which avoided the mortgage meltdown -- and into Mexico means Bed Bath & Beyond's foundations will increasingly be on more solid ground.
If Bed Bath & Beyond is the most threadbare prediction in the group, then Hasbro (NYSE: HAS ) will be the one with the most game. This toymaker has a portfolio of top brands, licensing agreements to exploit them, and the production vehicles to deliver the profit. While board games will always be at the heart of Hasbro (think Monopoly, Scrabble, and Trivial Pursuit), it has movie studio agreements and a new TV channel that will put its brands in front of every kid in some format that will transform a simple toymaker into a multimedia powerhouse.
There's nothing wrong with adding some international spice to your portfolio, in fact I'd say it's essential to being well-diversified. But once you travel the world, settle right back here at home with these top investments.
Got other investment ideas that you think will be better than China in 2010? Share them with us in the comments box below!
Follow along with our "12 Days of Christmas" article series: