This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are AbbVie Inc (ABBV); Arista Networks Inc (ANET); Regions Financial Corp. (RF); Norwegian Cruise Line Hldgs Lt (NCLH) and the Focus List deletions are Capital One Financial Corp. (COF); Hewlett Packard Enterprise Co (HPE); Novo Nordisk (NVO); Target Corp (TGT).

Target serves as the nation’s seventh-largest retailer, with its strategy predicated on delivering a gratifying in-store shopping experience and a wide product assortment of trendy apparel, home goods, and household essentials at competitive prices. Target’s upscale and stylish image began to carry national merit in the 1990s—a decade in which the brand saw its top line grow threefold to almost $30 billion—and has since cemented itself as a leading US retailer. Today, Target operates over 1,950 stores in the United States, generates over $100 billion in sales, and fulfills over 2 billion customer orders annually. The firm’s vast physical footprint is typically concentrated in urban and suburban markets as the firm seeks to attract a more affluent consumer base.

We expect holiday retail sales to rise about 3% this year to almost $1 trillion. Our experience is that when U.S. consumers are employed, they go out of their way make the season special. We believe the Fed's 50-basis-point rate cut last month, unemployment's downtick to 4.1%, and the potential for 3% GDP growth in 3Q are catalysts to make the season bright. The average annual sales gain during the past 20 holidays has been 4%, with a 3.8% increase last year and a high of 12% in the pandemic-recovery year of 2021. The only decline, of 4.7%, came as the economy entered a deep recession in 2008. We calculate holiday sales the same way the National Retail Federation does, based on the year-over-year change in the Commerce Department's Retail Sales data for the combined months of November and December. Like the NRF, we exclude sales at gas stations, car dealers, and restaurants -- and focus on core retail. There are three categories that represent two-thirds of holiday-season sales and drive our forecast: grocery stores, general merchandise stores, and e-commerce. Our forecasts for those categories are +2%, +3%, and +6.5%, respectively. Why is our forecast slightly below the historical average in a strong economy? Retail sales have a heavy weighting in non-durable goods, which has not been a blockbuster category, declining 0.8% in the 1Q GDP report and rising only 1.7% in the 2Q report. As well, a lot of the strength in both GDP and consumer spending has been in services, which also aren't a major factor in retail sales. Finally, GDP has had a big boost from investments, including AI, which aren't a factor in retail sales. Within our sales forecast, e-commerce is the biggest category, representing 30% of holiday sales. While e-commerce could grow faster than our 6.5% estimate, it has a tough comparison in an already big category. What would it take for holiday sales to grow 4%? Nine percent growth in e-commerce might do it, but that's a high hurdle.