Best Retail Buys for Gen Z

12/30/2015 9:00 am EST

Focus: STOCKS

Jim Powell

Principal Analyst, Global Changes & Opportunities

Although few members of Generation Z are affluent yet—they are still too young—together they have $44 billion in annual purchasing power, notes Jim Powell, editor of Global Changes & Opportunities Report.

Retailers who attract the Z-Gens—also known as Centennials—can find success beyond their wildest dreams. I think the Z-Gens will make this year’s holiday sales very special, but only for their favorite suppliers.

Generation Z should give Apple (AAPL) a big and long run of profits. The stock is especially attractive because the recent stock market correction reduced its price from $132 in late July.

Amazon.com (AMZN) also needs little introduction. This leading online retailer is a favorite with Generation Z, a group that likes to do business online. Amazon also produces Kindle E-Readers, tablets, and other devices.

In addition, Amazon is a major supplier of music, videos, and computer services to customers worldwide. If Amazon splits its stock within a few months, as I expect, investors should see a nice near-term bonus to go along with the exceptional long-term gains that I believe are on the way.

The Centennials spend a lot of time with their personal electronic devices, but they also enjoy outdoor activities. Even the dedicated couch potatoes want to look athletic.

One of the Z-Gen’s favorite sources for the necessary gear is Nike (NKE) which is best known for its athletic footwear. The company made a very profitable discovery several years ago when it realized that consumers would buy specialized shoes for each activity.

Nike then branched out into athletic apparel that’s specific to individual activities. The company also produces many products with college logos and colors.

To maximize its profits, Nike operates a chain of retail stores and an Internet Web site. I think the company will continue to be a winner.

I also like the outlook for TJX Companies (TJX) that operates a series of retailers, including Marshalls, Marmaxx, HomeGoods, TJX Canada, TJX Europe, T.K. Maxx, and Sierra Trading Post.

In total there are approximately 3,300 stores in the TJX group. The company also has growing online sales.

Many Centennials like TJX because the company sells popular apparel and home fashions at discount prices. Most products are dead ringers for their name-brand counterparts.

I think today’s budget-conscious consumers will give TJX a good holiday season and additional business throughout the new year.

I think long-term investors will see excellent returns from both Apple and Amazon.com. If I had to choose between them, I would pick Apple, but it would be a tough call. The best strategy is to buy both of them.

Nike and TJX are also attractive prospects. As with our two tech giants, choosing between these retailers is difficult. Nike is on a roll and seems to be most suitable for aggressive investors. TJX is moving more slowly and appears to be the more conservative choice.

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