5 Great Back-to-School Stocks
For the A-to-Zs of back to school, here's a look at five quintessential back-to-school brands, along with whether you should be buying stock at the same time you're stocking up.
According to the National Retail Federation, parents will be spending nearly as much this year ($603.63) as last year ($606.40) on back-to-school shopping, including clothing, supplies, and electronics. Despite the consumer cutbacks, combined K-12 and college spending this year will reach $68.8 billion.
My Foolish colleague John Maxfield recently discussed the end of the brick-and-mortar bookstore, but I don't think the bell has tolled just yet. Although Borders' liquidation sales are driving customers away from Barnes & Noble (NYS: BKS) now, in the long term, B&N will win over its competitor's fans. People will always need a place outside the home and office to gather, and aside of coffee shops, bookstores are a logical spot.
If you're not the brick-and-mortar type, Amazon.com (NAS: AMZN) sells new and used textbooks, buys used textbooks, and rents books through the Kindle to many of its 65 million monthly customers. Overlooking some dismal margins as a result of recent large-scale investments, including the acquisition of digital content for its streaming video service, the company has consistently increased revenues. If you'd bought stock even a month ago, you'd already be seeing some nice returns. Fool colleague Eric Bleeker called Amazon the most innovative company in tech. The stock's dipped 10% in the past few days, making now a decent time to buy.
Mini vs. Mac
According to the National Retail Federation, nearly 50% of consumers will be spending less this year on back to school. Although computers, laptops, and even tablets are no longer strictly in the luxury category, purchasing a new one every year is. The PC winner for back to school will offer the best deals with a high level of service and no unnecessary (and costly) add-ons.
Apple (NAS: AAPL) dominates Dell (NAS: DELL) in terms of the cool factor, but for customers buying a laptop or personal computer for their student, cool might not be enough. In the current economic climate, a get-the-job-done basic Dell may outsell a fully loaded but much more expensive MacBook.
Dell's stock has continually performed for the past year, with only slight dips. And Dell's getting scrappy, running a series of attractive back-to-school promotions, including free shipping, financing, and bonuses. Apple's promos don't come close.
But although Dell may see a burst of sales over Apple this fall, its profit margins can't compare in the long term. Apple's gross margin of 39.8% -- compared with Dell's 20% -- shows that despite much higher prices than Dell, Apple is continuing to run smoothly, with the flexibility to try new things.
Dell might sell more computers this fall, but you want Apple for a long-term buy and hold.
Most pack-toting students this fall will be sporting one of VF's (NYS: VFC) brands. The company owns JanSport, Eastpak, North Face, Eagle Creek, and Vans, among others.Despite higher production costs, the company was able to expand margins to 41.7% in the latest quarter from 39.1% in the year-ago period.
VF is on the cusp of an impending acquisition of Timberland (NYS: TBL) , which has a strong heritage brand with a healthy cash reserve and zero debt. You could wait and see how the acquisition affects VF, but you might miss out on some surprising gains.
- Add VF to My Watchlist.
Where does that leave us?
Back-to-school spending is the best indicator whether the holiday shopping season will be a merry one for retailers. What are the students in your life buying?
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At the time this article was published Fool contributor Molly McCluskey does not own shares or hold leadership positions in any of the companies mentioned. The Motley Fool owns shares of Timberland and Apple.Motley Fool newsletter serviceshave recommended buying shares of Amazon.com, Timberland, and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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