5 Stocks You Should Buy for 2016

5 Stocks You Should Buy for 2016

It’s not going to be easy to find winning stocks in an underlying deflationary environment that is likely to be coupled with the Federal Reserve beginning to remove the Band Aid. If you’re not sure where the economy is headed, then it’s highly recommended that you do your own research on population trends in the world’s biggest economies, global debt levels, how current wages compare to two decades ago, what's really driving real estate, commodity performance, as well as excessive promotions in the retail space in an effort to maintain traffic and sales.

It should be clear by this point that I don’t believe being long in equities would be a wise investment strategy for 2016. However, if you’re adamant on being long, consider some names that have potential.

'Filet Mignon' Shopping Experience

The first of those stocks is Costco Wholesale Corp. (COST). The easiest way to understand Costco’s strength is to liken it to a shopper going from eating ramen noodles to filet mignon. After this switch, the shopper becomes spoiled and is not likely to cut the annual membership expense even if times get tough. The clean and comfortable shopping environment combined with top-notch customer service and huge discounts for high quality is too much to give up. That’s why Costco has delivered consistent top-line and bottom-line growth over the past three fiscal years. The stock has appreciated 17.19% over the past year and currently yields 0.96%. (For more, see: Costco: How Wholesaling Makes it Billions in Revenue.)

Big Shopper Savings

Dollar General Corporation (DG) offers big savings to consumers. With a lack of any real wage growth to go along with elevated tuition, healthcare, and/or rent costs, the consumer is more focused on saving than spending at this time. A lack of confidence in the future also plays a big role in saving versus spending. If consumers want to save money when shopping, they’re likely to shop at Dollar General if one is convenient. Dollar General has also delivered consistent top-line and bottom-line growth over the past three years. The stock has only appreciated 0.89% over the past year and only yields 1.27%, but this is a company with a healthy debt-to-equity ratio of 0.53 and strong cash flow.Feeling Speculative?

If you want to own a stock that has cult like potential yet comes with high risk, look into Fitbit Inc. (FIT). The rise of the health-conscious consumer has coincided with increased exercise regimens. This, of course, favors Fitbit. However, the biggest bullish indicator is that more than one major retailer stated that demand for Fitbit products was high over the biggest holiday shopping weekend of the year. FIT has appreciated 13.93% since its initial public offering (IPO). It sports $575.48 million in cash versus no long-term debt and has generated $140.66 million in operational cash flow over the past 12 months. On the other hand, the short interest is an incredible 57.01%. (For more, see: Target Partners Up With Fitbit.)

Targeting All Consumers

If you’re not familiar with The Kroger Co. (KR), its game plan is simple: target everyone. This massive grocer offers discounts for the low-income consumer, high-quality for the high-end consumer, and value as well as top-notch customer service for everyone. Its Simple Truth natural and organic brand also hit a record high for total sales in the third quarter and is currently breaking weekly sales records for this quarter. Kroger’s top line and bottom line have both showed consistent growth over the past three fiscal years. The stock has appreciated 32.17% over the past year and currently yields 1.04%. The debt-to-equity ratio of 1.92 might not be spectacular, but is of no concern for a company that has generated $4.33 billion in operational cash flow over the past 12 months. An added bonus for KR is that people need to eat, even in a recession.

Diversification Juggernaut

Would you be interested in a company that operates in eight segments, has the potential to be the leader in renewable energy in the future, delivered top-line and bottom-line growth in its last fiscal year, saw its stock appreciate 18.68% over the past 12 months, and currently yields 3.02%? Enter: General Electric Co. (GE). It operates in the following segments: Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Appliance & Lighting and GE Capital. If a segment is showing growth, GE can use its massive cash flow, $24.61 billion operational cash flow generation in the past 12 months, to fuel that growth further. If a segment isn’t performing well, GE can divest, which investors often seem to appreciate. GE, the stock, might see some volatility, but any significant dips should be seen as buying opportunities, especially if you’re investing for retirement in the distant future. (For more, see: General Electric Stock: A Dividend Analysis.)

The Bottom Line

Owning any equity is going to present risk in 2016. However, if you’re set on being long, then consider further research on the five names listed above. They're all well run operations that are in line with current and likely future trends. (For more, see: The Top 5 ETFs to Track the Nasdaq in 2016.)