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Consumer Confidence Hits Three-Month High: 4 Stocks to Buy

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U.S. consumer confidence rose once again in February, the Conference Board said on Feb 23. The impressive rise comes as Congress passed the $1.9 trillion stimulus bill and the vaccination drive gathers pace.

Needless to say, the new round of stimulus will give consumers’ confidence a boost and allow them to spend more. At the same time, it shows the growing faith in the country’s economy.

Consumer Confidence Rises to a Three-Month High

Consumer confidence rose to a three-month high in February, to a reading of 91.3 from a revised 88.9 in January and beat analysts’ expectations of 90.2. Also, the gauge of sentiment increased to a reading of 92 in February from 85.5 in the month earlier.  Expectation Index declined to 90.8from January’s reading of 91.2.

That said, respondents of the survey also expect prices to rise in the coming days. According to the Conference Board data, consumers expect inflation to jump to 6.3%, the highest since June 2020.

Stimulus, Vaccination Boost Confidence

One of the major reasons behind the rise in consumer confidence in February is the new round of stimulus. The $1.9 trillion coronavirus relief package has now started reaching people, which is giving them the confidence to spend at ease. Besides, the vaccination drive is in full swing, which has raised hopes that the economy will recover faster than expected. Thus is further adding to the confidence of millions.

Moreover, despite the United States witnessing its worst decline in the second quarter since 1947, the economy rebounded in the third quarter and finished the last quarter up 4%. People had expected a worse performance but the moderate gains in the fourth quarter once again prove that people have not lost confidence in the economy’s strength. And now that the second round of stimulus has been approved, the economy is expected to perform better once again.

With the rise in consumer confidence, discretionary stocks seem to be an ideal sector to invest. The consumer discretionary sector has also been one of the biggest beneficiaries of this pandemic. The Consumer Discretionary Select Sector SPDR’s (XLY) has returned 27.4% in the past year or since the outbreak.

Our Choices

Given that consumer confidence has jumped for the third straight month, it shows the faith people have in the country’s economy despite the coronavirus taking a toll on it. It would thus be ideal to invest in consumer discretionary stocks right now. We have picked four stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) that are poised to benefit in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.

Central Garden Pet Company (CENT - Free Report) is looking forward to strengthening its position as one of the leading companies in the U.S. pet supplies, and lawn and garden supply spaces. Unique packaging, point-of-sale displays, logistic capabilities and a high level of customer service are some of its key growth catalysts.

The company’s expected earnings growth rate for next year is 7.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the past 60 days. Central Garden Pet Company has a Zacks Rank #2

Hibbett Sports, Inc. (HIBB - Free Report)  typically caters to small counties with the population ranging from 25,000-75,000 with a merchandise assortment focused on footwear, athletic equipment and apparel.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 5.4% over the past 60 days. Hibbett Sports has a Zacks Rank #1.

DICKS Sporting Goods, Inc. (DKS - Free Report) operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories, and a broad selection of outdoor and athletic equipment such as for team sports, fitness, camping, fishing, tennis, golf and water sports.

The company’s expected earnings growth rate for the current year is 58%. The Zacks Consensus Estimate for current-year earnings improved 0.3% over the past 30 days. Dicks Sporting has a Zacks Rank #2.

Prestige Consumer Healthcare Inc. (PBH - Free Report) and its subsidiaries develop, manufacture, market, sell and distributes over-the-counter (“OTC”) healthcare and household cleaning products in United States, Canada, Australia and certain other international markets.

The company’s expected earnings growth rate for the current year is 9.5%. The Zacks Consensus Estimate for current-year earnings improved 1.9% over the past 30 days. Prestige Consumer Healthcare holds a Zacks Rank #2.

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