5 Back-to-School Stocks You Can Buy Right Now

Here at The Motley Fool, we prefer to invest in companies, not just trade stocks, and think about where a business might be headed five or 10 years down the road as opposed to how the next analyst upgrade or downgrade might affect a stock. However, that doesn't stop us from looking at smaller trends that can ultimately have a big impact on a company's future growth prospects.

Source: D. Sharon Pruitt, Flickr.

In August of last year, $8.5 billion was spent at family clothing stores while an additional $2 billion was spent at bookstores, according to data from the U.S. Census. Marking the slow wind-down of the vacation season and the rush to get clothes, supplies, and gadgets needed for the upcoming school year, August and September, better known as the back-to-school shopping season, represents one of the many times of the year that retailers absolutely covet. That's why today I want to take a closer look at five companies that could benefit in a big way this back-to-school shopping season.

A portfolio "staple"
Some of the more obvious winners during the back-to-school season are companies that provide stationery supplies. Although you can pretty much pick up anything from paper and binders to pencils and pens at your local grocery store, I think office-supply chain Staples (NASDAQ: SPLS  ) might be a big destination of choice for back-to-school shoppers. Staples is in the perfect position to pick up back-to-school traffic with its main rivals OfficeMax and Office Depot merging. Their combination will result in store closures and displaced customers who could very easily find their way into Staples' stores. With a renewed focus on direct-to-consumer sales as well, look for Staples to be a pleasant surprise for investors.

Fashion forward
Another obvious stop for back-to-school shoppers is the clothing store to pick up the latest fashions for the upcoming school year. Here I believe TJX (NYSE: TJX  ) , the company behind T.J. Maxx, Marshalls, and HomeGoods, stands to be a big winner. With U.S. consumer spending in just OK shape and taxes for most Americans higher than where they were at this time last year, consumers are likely to shy away from the traditional mall stores and opt instead for brand-name merchandise at discount prices ... or, in other words, precisely what TJX specializes in. Even though the company's first-quarter comparable-store sales increase of 2% might appear tame, that figure compares with record results in the previous year. TJX has the right product and the management team to continue to succeed.

Source: Sean MacEntee, Flickr.

A healthy diet of "fruit"
Don't overlook the allure of technology during this back-to-school season, either. In addition to smartphones becoming a practical necessity for today's youth, tablets have become an integral learning tool for children from preschool through college. This is why I think investors should be considering Apple (NASDAQ: AAPL  ) , which still dominates the tablet market with market share of 32% and sold a whopping 31.2 million iPhones just last quarter. Apple may have been slapped with the "boring" label in recent months, but this is the same innovative and cash-rich company we've watched transform our world over the last decade.

This company changed the game for everyone
Back-to-school season has become more than just what we buy; it's how we buy it! Two decades ago, retail transparency was nonexistent and we had but a few stores locally to choose from when we shopped. With the advent of the Internet and marketplaces such as Amazon.com (NASDAQ: AMZN  ) , we now have the ability to shop thousands of items at once from the convenience of our homes, and often save a few dollars along the way. A study conducted by BIGresearch between 2006 and 2012 indicates that since 2006, the number of survey respondents who plan to shop online for back-to-school items has risen from 30.5% to 37.3%. Amazon could become a big beneficiary of that bump. With an enormous library and tech gadgets galore, parents need not even leave their house anymore to prepare their children for the upcoming school year.

Source: U.S. Navy, Wikimedia Commons.

Charge it!
Finally, when we've decided on what we want to buy for back-to-school, it comes time to pay for it. This is when I suspect most consumers will be reaching into their wallets and pulling out a credit card with a Visa (NYSE: V  ) logo on the front of it. With a whopping 40% of Visa's payment volume originating from the U.S. and consumers' paychecks being pressured by higher taxes, it seems only logical that many would turn to credit to finance their once-a-year purchases. Don't discount Visa's push into prepaid debit cards, either, which could be used with increasing frequency by parents to teach children how to properly spend and save money.

There's little denying that the retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only the most forward-looking and capable companies will survive, and they'll handsomely reward investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.


Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 19, 2013, at 4:49 AM, bestwaytoriches wrote:

    Sean,

    RAD is one you my want to consider adding to your back to school series. Just voted the great American turn around story. RAD was left for BK at .93back in Dec. 2012. Now MGT has strung together many strong beats. RAD back to school is one of there strongest seasons. These quarters are there strongest sales cycles and most profitable.

    As RAD beats SSS figures and beats earnings the stock price will continue upward. Price target Dec. 2013 $ 5.50 and Dec 2014 $ 8

    Better YOY Earning support these targets and still label RAD very undervalued. earning target Feb 2013 .13 Actual Feb 2014 .18 est.and Feb 2015 .26 est.

    Remember second half of the year RAD does better.

    Shorts are many yr lows 27mil. Institutional holding multi yr. High 57%

    this will continue.

    RAD valuations and projections of profits make it a great buy out target. The price targets I've lay out are based on profits from analyst est. Study the past earnings track record from the analyst and you will find the analyst have been on avg. 40% off on the low side. As mentioned above RAD investors could see the short term price target of $ 5.50 before Dec 2013 and $ 8 before Dec. 2014. Another fact to support this is the Point and Figure chart with a price target of $ 8.50

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2590625, ~/Articles/ArticleHandler.aspx, 9/15/2014 12:25:53 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement