Apple, Disney, and Foot Locker are the best stocks to buy now: Strategist

Never mind Santa stuffing your stockings with toys—what stocks should investors shop for ahead of a potential “Santa Claus rally”?

Erin Gibbs, chief equity investment strategist at S&P Investment Advisory Services, has already made her list. She said she’s looking for stocks that have decent valuation based on a price-to-forward earnings basis and a potential to increase 10% to 15% from current levels.

Gibbs, who has more than $16 billion in assets under advisory, has three stocks she is bullish on for next year:

Foot Locker (FL)

“Foot Locker has some tremendous growth,” said Gibbs, who forecasts a 5% increase in the company’s sales for 2016 and earnings per share growth of 12%. “They have a new CEO [Richard Johnson]. They've really been executing on all cylinders.”

Gibbs is positive on the retailer’s outlook because of what she sees as a secular trend toward consumers living more active lifestyles, growth in children and women’s businesses, expansion in Europe, and its non-core apparel sales.

Though Foot Locker shares are up nearly 15% over the past 12 months, she notes that they are trading near its 3-year average of 14 times forward earnings.

“This is been a really good entry point for the stock for the past year," she said. “I see this is not only being able to get growth but also get a good value.”

Disney (DIS)

“Who doesn't love Disney?” said Gibbs. She expects the entertainment giant’s revenues to grow 7% over the next four quarters and earnings to climb 10%.

“What we're a really looking for next year is growth from a lot of their films that they've acquired, including ‘Star Wars’ and all the sales of the merchandise that come with it—the clothing, the toys,” she said. “We’re really seeing some good growth.”

The stock, which is up 33% since last year, now trades at nearly 21 times its expected forward earnings, “but we see it as worth it,” said Gibbs.

Apple (AAPL)

Though it is the largest company in terms of market cap, Gibbs sees the tech giant as attractively priced.

“Apple is still a very high quality, good company with great value,” she said. “It's trading well below its 3-year average at about 12 times forward earnings. This is effectively dirt-cheap for Apple.”

Gibbs said there are some concerns about the recent iPhone’s sales, and Apple’s stock is flat since this time last year. However, its current price-to-forward earnings multiple is still below the S&P 500’s (^GSPC) multiple of 17.6.

“We like the stock as a very long term investments,” she said.

[Disclosure: AAPL, DIS, and FL are in one or more of SPIAS model portfolios advised by Gibbs. Neither Gibbs nor any immediate family memebers have positions in AAPL, DIS, or FL.]

 

 

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