As each year comes to an end, Wall Street strategists, analysts and investors are forced to think about what is likely to occur in the markets. With the Dow Jones industrials and S&P 500 having managed gigantic gains, well above 20%, and with the tech-heavy Nasdaq up over 30% this year alone, it might be easy for most investors to believe that it would be hard to find any serious strong gains in 2020. That it’s just not the case is being pitched to investors now.

It turns out, even after a presidential impeachment, that the economy is far stronger than what was reported for many months in 2019. Hindsight has proven that the massive sell-off in the fourth quarter of 2018 was too much and too fast. The gains in the Dow would be only about 6% higher, and almost 9% for the S&P 500, if you measured from the current peak back to the pre-tank highs in August and September of 2018.

24/7 Wall St. has been outlining major investment trends coming down the pipe for 2020. We do this each year, using outside research for some guidance. We also create our own forecasts and that measure magically achieved the Dow 28,000 this year.

In our outside reviews, RBC Capital Markets’ Scot Ciccarelli has issued three top picks in the hardlines retail sector. Discretionary spending has been quite strong over the past decade, and the current economic strength is being bolstered by a super-tight labor market with strong wages, all supportive of a strong consumer. For that matter, investors and anyone in the economy need to consider that consumer activity of all sorts is responsible for growth in gross domestic product (GDP).

Note that most analysts issuing Buy and Outperform ratings are calling for 8% to 10% implied upside on most Dow or S&P 500 types of stocks at this stage in the decade-plus bull market. Wall Street strategists are by and large looking for 6% to 8% upside from their S&P 500 targets for 2020 issued in recent weeks. These below generally call for greater upside than that, but all investors should know that analyst calls and forecasts should only be a starting point for considering any new investments.

We have included the most recently available price target data, provided the implied upside (with total return if applicable) and offered a comparison to the Refinitiv sell-side consensus analyst price target as well. Here are RBC’s top picks in hardlines retailers for 2020.

Lowe’s

Lowe’s Companies Inc. (NYSE: LOW) leads RBC’s top picks for 2020. With low interest rates looking more likely and with a better economy, a solid backdrop for housing is expected to aid the home improvement retailer. RBC expects that Lowe’s likely will grow its e-commerce presence in the second half of 2020 by a measure greater than what is modeled into most analyst numbers.

RBC had raised its target price to $134 a share from $129 late in November, but the shares are back up to about $120 and just under the highs. Even to the one-month-old target, this implies almost 12% upside, without even considering its 1.8% dividend yield. RBC is about $1.50 higher than the consensus analyst target on last look.

Dollar Tree

Dollar Tree Inc. (NASDAQ: DLTR) was another pick within the three top hardlines picks for 2020. What is interesting here is that Dollar Tree was basically flat for the year, now that its shares are down 20% from the October peak of about $117. To blame are a bad earnings report and a cautious outlook for the current quarter. Let’s just call it a trade war casualty.

RBC noted that Family Dollar comparable sales have been nicely positive and its margin is expected to improve. At the end of November, RBC lowered its target price to $106 from $127, but even the new lower target is still a tad above the $104.25 consensus. It also represents more than 15% upside from the current $92.00 share price.

Advance Auto Parts

Advance Auto Parts Inc. (NYSE: AAP) was the last name in the hardlines top picks for 2020. After the retailer was among the casualties in the auto parts companies, RBC believes strong industry trends are in place. Ciccarelli sees Advance Auto Parts as having one of the best risk-reward opportunities in the sector. That call is with the shares down 15% from recent highs and with relatively no real performance in 2019 despite a bull market raging on.

Runners-Up

While the three top picks are obviously the biggest upside calls, Ciccarelli and the RBC team is still positive on other retailers in 2020. These were listed here in alphabetical order.

CarMax Inc. (NYSE: KMX) also was viewed favorably for 2020, despite having risen over 50% so far in 2019. The company’s expansion up and down the chain in the sales cycle and running very strict rules at its dealerships are driving the bus here, with the opportunity to keep adding incremental sales growth. RBC raised its target price to $108 from $105, compared with a current share price of $98.70 and a $105 consensus target price.

Costco Wholesale Corp. (NASDAQ: COST) remains a bullish pick as the company’s costs and offerings are still attracting shoppers and driving repeat traffic. RBC had already raised its target price to $334 from $329 after reiterating an Outperform rating.

Dollar General Corp. (NYSE: DG) has enjoyed fewer painful moments in 2019 than rival Dollar Tree noted above, but Dollar General is still the king of the space and is enjoying stronger results from lower-income and middle-income consumers.

Five Below Inc. (NASDAQ: FIVE) is another name seen doing well in retail as it is still growing its footprint, with sales expected to keep rising 20% this year and next. Despite strong earnings per share growth, the company is growing rather than allocating funds for dividends.

Home Depot Inc. (NYSE LOW) was viewed favorably due to expanding its wide moat, but Lowe’s is believed to be in a position to gain back some share at this time.

Three other names that are less covered were also given upside targets for 2020: Tractor Supply Co. (NASDAQ: TSCO), Ollie’s Bargain Outlet Holdings Inc. (NASDAQ: OLLI) and O’Reilly Automotive Inc. (NASDAQ: ORLY).

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