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5 Consumer Discretionary Stocks to Buy as GDP Projections Rise
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Even as enthusiasm over President Trump’s economic proposals begins to fade, speculation about the first quarter GDP reading is gaining currency. A sizeable swathe of economists believes that the current quarter’s growth is likely to be soft, carrying forward a trend which has developed in the recent past. This would certainly be unwelcome tidings for investors, seeking support from economic fundamentals after the recent healthcare legislation fiasco.
But recently released reports have reduced fears of a disappointing GDP reading. In particular, a decline in trade deficit has raised hopes of improved growth data. Strong consumer confidence numbers and improving forecasts mean that you would do well to bet on consumer discretionary stocks, likely to outperform the market if growth picks up.
Trade Deficit Falls, Consumer Confidence Hits Record Level
According to the Department of Commerce, the goods deficit declined by 5.9% to $64.8 billion in February after a fall in imports outweighed a decline in exports. This sharp contraction of the trade deficit is likely to influence economists considerably on the GDP front, likely leading to an upward revision of their first quarter estimates.
The fact that the economy is improving was further borne out by Tuesday’s consumer confidence release. The Conference Board’s consumer confidence index increased from 116.1 in February to 125.6 in March, the highest level witnessed in 16 years. The associated expectations index also increase. Additionally, home prices hit a 31-month peak in January, per Case Shiller data.
New York, Atlanta Fed Increase Q1 Forecasts
The fact that economic growth is picking up has become increasingly visible, given that most recent economic releases have been bullish. In February, durable orders increased by 1.7%, exceeding the consensus estimate of 1.4%. Additionally, new single-family houses sales jumped 6.1% last month to hit the 592,000, the highest seasonally adjusted annual rate since Jul 2016.
Such releases have led to the New York Federal Reserve increasing its first quarter GDP forecast to around 3%. The regional central bank raised its forecast to 2.96% from the rate of 2.83% estimated in the previous week. Of course, this figure is toward the upper end of projections.
According to the Atlanta Fed’s latest projections, first quarter growth is likely to come in at 1%, higher than the 0.9% estimated on Mar 16. Economists at Barclays PLC (BCS - Free Report) have taken the middle path, increasing their GDP estimate from 1.2% to 1.6% following a fall in the trade deficit.
Our Choices
All of the recently released economic reports indicate that growth is increasing significantly. An uptick in the business cycle means that cyclical stocks are likely to regain favor, since such conditions provide clear winners and losers on the equity markets. Of these, consumer discretionary stocks are likely to emerge as strong performers, given that consumption is a major component of GDP.
Such a trend is already in evidence, what with the Consumer Discretionary Select Sect SPDR (XLY) gaining 7.1% year to date. Adding consumer discretionary stocks to your portfolio would make for a profitable choice at this time. However, picking winning stocks may be difficult.
This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.
Performance of Consumer Discretionary Sector vs. Stock Picks
SodaStream International Ltd. is engaged in the manufacture and sale of home beverage carbonation systems, which enable consumers to easily transform ordinary tap water instantly into carbonated soft drinks and sparkling water.
SodaStream has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. The company has expected earnings growth of 16.7% for the current year. Its earnings estimate for the current year has improved by 36.7% over the last 60 days. The stock has returned 19.1% year-to-date, outperforming the Zacks Consumer Discretionary sector, which has gained 8% over the same period.
SP Plus Corporation (SP - Free Report) provides professional parking, ground transportation, facility maintenance, security and event logistics services to property owners and managers in all markets of the real estate industry.
SP Plus has a VGM Score of B. The company has expected earnings growth of 18.9% for the current year. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 21.37, lower than the industry average of 23.74. The stock has returned 19.2% year-to-date, outperforming the Zacks Consumer Discretionary sector, which has gained 8% over the same period. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hasbro Inc. (HAS - Free Report) is engaged in the design, manufacture and marketing of games and toys.
Hasbro has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of 4.6% for the current year. Its earnings estimate for the current year has improved by 1.1% over the last 30 days. The stock has returned 27.8% year-to-date, outperforming the Zacks Consumer Discretionary sector, which has gained 8% over the same period.
Crown Crafts, Inc. (CRWS - Free Report) is a designer, marketer and distributor of juvenile, toddler and infant consumer products.
Crown Crafts has a Zacks Rank #2 and a VGM Score of A. The stock has a P/E (F1) of 15.04x, lower than the industry average of 16.00. Its earnings estimate for the current year has improved by 6.5% over the last 30 days. The stock has returned 11.6% year-to-date, outperforming the Zacks Consumer Discretionary sector, which has gained 8% over the same period.
Salem Media Group, Inc. (SALM - Free Report) is a radio broadcaster, Internet content provider and magazine and book publisher specializing in Christian and Conservative content.
Salem Media has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of 6.7% for the current year. Its earnings estimate for the current year has improved by 20% over the last 30 days. The stock has returned 13.6% year-to-date, outperforming the Zacks Consumer Discretionary sector, which has gained 8% over the same period.
More Stock News: 8 Companies Verge on Apple-Like Run Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
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5 Consumer Discretionary Stocks to Buy as GDP Projections Rise
Even as enthusiasm over President Trump’s economic proposals begins to fade, speculation about the first quarter GDP reading is gaining currency. A sizeable swathe of economists believes that the current quarter’s growth is likely to be soft, carrying forward a trend which has developed in the recent past. This would certainly be unwelcome tidings for investors, seeking support from economic fundamentals after the recent healthcare legislation fiasco.
But recently released reports have reduced fears of a disappointing GDP reading. In particular, a decline in trade deficit has raised hopes of improved growth data. Strong consumer confidence numbers and improving forecasts mean that you would do well to bet on consumer discretionary stocks, likely to outperform the market if growth picks up.
Trade Deficit Falls, Consumer Confidence Hits Record Level
According to the Department of Commerce, the goods deficit declined by 5.9% to $64.8 billion in February after a fall in imports outweighed a decline in exports. This sharp contraction of the trade deficit is likely to influence economists considerably on the GDP front, likely leading to an upward revision of their first quarter estimates.
The fact that the economy is improving was further borne out by Tuesday’s consumer confidence release. The Conference Board’s consumer confidence index increased from 116.1 in February to 125.6 in March, the highest level witnessed in 16 years. The associated expectations index also increase. Additionally, home prices hit a 31-month peak in January, per Case Shiller data.
New York, Atlanta Fed Increase Q1 Forecasts
The fact that economic growth is picking up has become increasingly visible, given that most recent economic releases have been bullish. In February, durable orders increased by 1.7%, exceeding the consensus estimate of 1.4%. Additionally, new single-family houses sales jumped 6.1% last month to hit the 592,000, the highest seasonally adjusted annual rate since Jul 2016.
Such releases have led to the New York Federal Reserve increasing its first quarter GDP forecast to around 3%. The regional central bank raised its forecast to 2.96% from the rate of 2.83% estimated in the previous week. Of course, this figure is toward the upper end of projections.
According to the Atlanta Fed’s latest projections, first quarter growth is likely to come in at 1%, higher than the 0.9% estimated on Mar 16. Economists at Barclays PLC (BCS - Free Report) have taken the middle path, increasing their GDP estimate from 1.2% to 1.6% following a fall in the trade deficit.
Our Choices
All of the recently released economic reports indicate that growth is increasing significantly. An uptick in the business cycle means that cyclical stocks are likely to regain favor, since such conditions provide clear winners and losers on the equity markets. Of these, consumer discretionary stocks are likely to emerge as strong performers, given that consumption is a major component of GDP.
Such a trend is already in evidence, what with the Consumer Discretionary Select Sect SPDR (XLY) gaining 7.1% year to date. Adding consumer discretionary stocks to your portfolio would make for a profitable choice at this time. However, picking winning stocks may be difficult.
This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.
Performance of Consumer Discretionary Sector vs. Stock Picks
SodaStream International Ltd. is engaged in the manufacture and sale of home beverage carbonation systems, which enable consumers to easily transform ordinary tap water instantly into carbonated soft drinks and sparkling water.
SodaStream has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. The company has expected earnings growth of 16.7% for the current year. Its earnings estimate for the current year has improved by 36.7% over the last 60 days. The stock has returned 19.1% year-to-date, outperforming the Zacks Consumer Discretionary sector, which has gained 8% over the same period.
SP Plus Corporation (SP - Free Report) provides professional parking, ground transportation, facility maintenance, security and event logistics services to property owners and managers in all markets of the real estate industry.
SP Plus has a VGM Score of B. The company has expected earnings growth of 18.9% for the current year. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 21.37, lower than the industry average of 23.74. The stock has returned 19.2% year-to-date, outperforming the Zacks Consumer Discretionary sector, which has gained 8% over the same period. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hasbro Inc. (HAS - Free Report) is engaged in the design, manufacture and marketing of games and toys.
Hasbro has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of 4.6% for the current year. Its earnings estimate for the current year has improved by 1.1% over the last 30 days. The stock has returned 27.8% year-to-date, outperforming the Zacks Consumer Discretionary sector, which has gained 8% over the same period.
Crown Crafts, Inc. (CRWS - Free Report) is a designer, marketer and distributor of juvenile, toddler and infant consumer products.
Crown Crafts has a Zacks Rank #2 and a VGM Score of A. The stock has a P/E (F1) of 15.04x, lower than the industry average of 16.00. Its earnings estimate for the current year has improved by 6.5% over the last 30 days. The stock has returned 11.6% year-to-date, outperforming the Zacks Consumer Discretionary sector, which has gained 8% over the same period.
Salem Media Group, Inc. (SALM - Free Report) is a radio broadcaster, Internet content provider and magazine and book publisher specializing in Christian and Conservative content.
Salem Media has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of 6.7% for the current year. Its earnings estimate for the current year has improved by 20% over the last 30 days. The stock has returned 13.6% year-to-date, outperforming the Zacks Consumer Discretionary sector, which has gained 8% over the same period.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>