If you are looking for stocks to buy in the current market environment, then I highly recommend taking a closer look at Dunelm Group (LSE: DNLM).
Retail companies are really out of fashion right now, but Dunelm isn’t a traditional retail business. Its unique offering has helped the company grab market share and outperform most of its peers for the past six years. And it doesn’t look as if this trend is going to come to an end any time soon.
Beating expectations
Since 2013, Dunelm’s sales have grown at a compound annual rate of around 9%. This year, the company is on track to blast past this average.
In the company’s last trading update before its fiscal full-year results, management revealed like-for-like sales rose 15.4% in the fiscal fourth quarter, with a 37% jump in online revenue.
Following this performance, Dunelm hiked its profit expectations for the full year. City analysts are now expecting the company to report earnings growth of 19% for fiscal 2019, making Dunelm one of a handful of retailers that are still seeing earnings and sales growth.
This performance is the primary reason why I am confident Dunelm could be a great addition to your portfolio today.
Unique relationship
Another retailer that is also outperforming in a tough environment is JD Sports Fashion (LSE: JD).
This multi-channel retailer of sports fashion is, according to current City targets, on track to report total sales of £5.8bn for its current financial year. If the company manages to hit this lofty target, it will have increased sales by 380% in six years. Over the same time frame, earnings per share have risen at a compound annual rate of 36%.
JD’s secret to success lies in its connections with suppliers. It has agreements with major sports fashion brands, which allow the company first dibs on any new styles. This means JD is usually the first port of call for the fashion-conscious. Further, the firm offers these products at attractive prices.
As long as the business does not deviate from its formula for success, I think it is highly likely JD will continue to outperform competitors for the foreseeable future. A P/E of 18.7 makes this one of the more expensive retailers on the London market, but I think it is a price worth paying for this first-class business.
Development pipeline
Moving away from the retail sector, I reckon student accommodation provider Unite Group (LSE: UTG) could be a stock worth buying in the current environment.
As one of the largest student landlords in the country, Unite has unrivalled economies of scale in the accommodation business. It is also a pretty defensive business. Even if the global economy enters a depression tomorrow, students will still want to go to university, meaning Unite should be relatively unaffected.
Unite’s pipeline of new developments and acquisitions promises plenty of growth in the years ahead. Last week the company announced that it had acquired a new 620-bed development site in Nottingham as part of its ongoing target to maintain a development pipeline of 2,000 beds a year.
Based on the company’s development pipeline and existing properties, City analysts believe the firm has the potential to pay out 33p per share in dividends this year, giving a potential dividend yield of 3.2%. The City thinks the payout could rise a further 12% in 2020, offering a yield of 3.6%.
