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3 Top U.S. Stocks to Watch in September

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The TJX Companies, Adobe Systems, and Dave & Buster's could make big moves in the coming weeks.

Earnings season is over, but September marks the start of the school calendar, and with it, trading levels are back in full swing.

September has a reputation for being a poor month for stocks. Historically, the VIX, or the Volatility Index, has been highest in September,  and a number of threats are looming this year, including trade tariffs, a rate hike from the Fed, and the Mueller investigation.

Still, there are stocks that are poised to pop this month. Keep reading to see why these three Motley Fool contributors think you should keep your eye on The TJX Companies (TJX 1.96%)Adobe Systems (ADBE -0.77%), and Dave & Buster's Entertainment (PLAY 1.58%).

American flags hang in front of the stock exchange

Image source: Getty Images.

A high-quality retailing business

Demitri Kalogeropoulos (The TJX Companies): Strengthening economic trends are lifting results for many of the country's biggest retailers, and TJX is no exception. Its pace of comparable-store sales growth doubled between the first and second quarters of fiscal 2018, the company announced last month, as customer traffic improved across its largest franchises.

The off-price giant doesn't require a quickly expanding industry to keep its revenue marching higher, though. In fact, its business performs well during soft or declining markets, since its army of merchandise buyers benefits from a surge of overstocked or mispriced inventory. That flexibility is clear from TJX's track record of 22 consecutive years of sales growth.

The best news for the business lately is that the TJ Maxx, Marshalls, and HomeGoods franchises are each winning market share, including in the coveted millennial demographic. Those gains add weight to management's claim that the company enjoys major competitive advantages that allow it to deliver on-trend merchandise at attractive prices.

Improving traffic trends should allow the retailer to accelerate its sales growth this year, but the better news for investors involves its long-term plans. TJX hopes to expand to over 6,000 locations around the world, up from 4,200 today. That aggressive target is supported by the fact that its treasure-hunt atmosphere and always-fresh store layout help secure customer loyalty, even as consumers shift more of their spending  online.

Painting a more predictable future

Steve Symington (Adobe Systems): Shares of Adobe Systems have soared more than fivefold over the past five years -- including a nearly 50% rise so far in 2018 as of this writing -- with good reason. Demand for the San Jose, California, creative software specialist's wares has soared as it made the transition away from perpetual software licenses toward a cloud-based subscription model in recent years. Revenue in its most recent quarter climbed an impressive 23.9% year over year to nearly $2.2 billion, roughly 89% of which came from recurring sources. Meanwhile, adjusted earnings per share rose an even better 62.7%.

And in June, Adobe completed its nearly $1.7 billion acquisition of Magento Commerce in a move to extend its scope and address a "key underserved market" by integrating commerce cloud solutions within its Adobe Experience Cloud product.

When Adobe releases its next quarterly results on Sept. 13, I don't foresee any big surprises from within its increasingly predictable core business. But given the size of its Magento acquisition, you can be sure the market will be watching closely for any updates on not only one-time charges related to the purchase, but also whether the integration of Magento and its cloud commerce products is progressing as planned. If all is well, I suspect Adobe stock will continue its upward march.

It's not all fun and games

Jeremy Bowman (Dave & Buster's Entertainment): It's been a roller coaster year for Dave & Buster's, the video-games and dining specialist. The "eatertainment" chain was once one of the strongest stocks in the restaurant industry with steadily climbing comparable sales. But that all changed late last year when comps suddenly went into a nosedive. The stock plunged when management lowered its guidance at the beginning of the year.

After bottoming out at $38 in May, the stock has made a surprising comeback, though performance has continued to suffer. Shares have now regained the losses from the sell-off at the beginning of the year as optimism about the stock has returned.

With D&B expected to report earnings on Sept. 14, the stock is likely headed for another big swing, one way or the other. Analysts expect revenue to increase 10.9% but EPS to fall from $0.71 to $0.66.

That low bar could present an opportunity if management can show that comps improved from the 4.9% decline in the first quarter. This report will also mark former CFO Brian Jenkins' first one as CEO after taking over for Steve King, who retired amid the company's recent struggles. 

Despite those challenges, D&B remains a business with little direct competition and a traffic-driving model that makes it an appealing tenant to mall landlords. With plans to double its store count across North America to 200, the company should eventually escape its recent doldrums. The only question is whether that will be sooner or later. September's report should give us some valuable insight.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. Jeremy Bowman owns shares of Dave & Buster's Entertainment. Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Adobe Systems. The Motley Fool recommends Dave & Buster's Entertainment and The TJX Companies. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Adobe Inc. Stock Quote
Adobe Inc.
$447.56 (-0.77%) $-3.46
CBOE S&P 500 Volatility Index Stock Quote
CBOE S&P 500 Volatility Index
$19.69 (-1.30%) $0.26
The TJX Companies, Inc. Stock Quote
The TJX Companies, Inc.
$66.65 (1.96%) $1.28
Dave & Buster's Entertainment, Inc. Stock Quote
Dave & Buster's Entertainment, Inc.
$43.75 (1.58%) $0.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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