Yesterday, I was invited on CNBC’s "Power Lunch" show to discuss my top picks to profit from the Amazon.com (AMZN) boom. As always, I thoroughly enjoyed my time on Power Lunch, and we covered a lot of ground in just a few minutes. So if you didn’t catch me on CNBC yesterday, you can get caught up by visiting the CNBC website or by clicking on the player below.
My Top Picks for the Amazon Boom
If you’re not able to view the video at this time, here’s what I talked about in a nutshell…
One of my top direct plays on the online shopping boom is Packaging Corporation of America (PKG). It is the country’s fourth-largest containerboard producer, and the third-largest producer of uncoated freesheet, which is used for printer and writing paper. Each year, the company produces some 3.7 million tons of containerboard, and it ships nearly 50 billion square feet of corrugated products.
As consumers increasingly turn to online shopping (and shipping), demand for Packaging Corp of America’s products has risen. Looking ahead, Packaging Corp is expected to generate double-digit earnings growth and sales growth in the mid-to-high single digits. This steady sales and earnings growth will also help the company maintain (and grow) its already generous dividend. At current prices, PKG has a 2.7% annual dividend yield, and a 14.5% dividend growth rate. Keeping this in mind, PKG is an A-rated Strong Buy.
One of my other top stocks is actually a retailer that is somewhat "Amazon proof," which is saying something in today’s market. ULTA Salon Cosmetics & Fragrance (ULTA) is a one-stop beauty shop. The store touts the prestige and mass selection of its 20,000+ cosmetic products. In addition, ULTA houses in-store salons, which offer a range of services as well as styling products from hair care to flat irons.
ULTA sells its own brand of products but has also found success in retailing mega-brands like Clinique and Lancome, and has a strong customer base, boasting 20 million customer loyalty program members. Looking ahead to FY 2017, ULTA expects to achieve comparable sales growth of between 8% and 10%, e-commerce sales of 40%, and EPS growth in the low twenties percentage range. The retailer also plans to open 100 net new stores. ULTA is a solid B-rated Buy.