Back in 2013, CNBC’s Jim Cramer coined the acronym FANG for the group of tech heavyweights, Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Netflix (NASDAQ: NFLX), and Google-parent Alphabet (NASDAQ: GOOGL, GOOG).
Since then, these market leading stocks have seen massive gains. Google is up more than 200%, Facebook is up more than 550%, Amazon 630%, and Netflix is up a monster 2,000% over these last six years.
Now Cramer is back at it with a new basket of consumer plays he says investors should be keeping an eye on. The WATCH stocks include Walmart (NYSE: WMT), Amazon, Target (NYSE: TGT), Costco (NASDAQ: COST), and Home Depot (NYSE: HD).
These stocks have all outperformed the market so far this year, but Cramer believes there’s still upside ahead considering these companies’ pricing power and superior supply chain management.
And Cramer isn’t the only one recommending these stocks. Short Hills Capital Partner’s Steve Weiss is betting on the consumer and buying up shares of Amazon and Target.
“I wanted to be more exposed to the consumer. I didn’t have much retail exposure,” Weiss said on CNBC.
Both Amazon and Target are in the discretionary sector, which climbed to an all-time high last Friday alongside technology, staples, and utilities.
Goldman Sachs is betting on big-box retailers Costco, Home Depot, Target, and Walmart as well.
“We are at an inflection point for several companies where we are starting to see a resumption of operating income dollar growth; demonstrating not only the strong top line execution but also a point of leveraging years of investment to become true omni-channel retailers,” Goldman’s Kate McShane wrote in a note to clients last week.
Target is Goldman’s “best idea” among the group due to its sustained strong comp growth “accomplished by ongoing store closures and bankruptcies of other brick and mortar retailers.”
“We note that the Street remains mostly Neutral rated on the name; but we would argue Target has finally reached that turning point in their earnings trajectory they have been working towards for the last 3 years,” McShane wrote.
Pete Najarian of Investitute likes Target as well. Najarian owns the stock and likes the name because it is still “very inexpensive” and continues to demonstrate strong growth. In May, Target reported Q1 earnings per share growth of 15% and trades for 14 times next year’s earnings.
As for the other WATCH stocks, Najarian is concerned about elevated valuations.
“From a valuation perspective, I get a little bit more nervous about the Walmarts, the Amazons of the world… I look at Costco, I feel like it’s a little bit inflated in terms of its P/E right now,” Najarian said.
However, Najarian does also like Home Depot. And despite the stock’s 25% rally so far this year, Najarian believes we could see HD shares “15% higher very quickly” if any progress of significance is made toward a U.S.-China trade deal.