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Top 5 Consumer Discretionary Stocks to Buy on Spending Boom

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Consumer spending is one of the major driving forces for economic growth. Unfortunately, the coronavirus outbreak last year compelled consumers to refrain from spending much amid the uncertainties.

But as the United States slowly recovers from the coronavirus crisis, consumer outlays are widely expected to pick up with more people likely to spend on non-essential commodities. In fact, Aneta Markowska, chief economist at Jefferies, as quoted from a MarketWatch article, projected that personal consumption expenditure (PCE) – a measure of national consumer outlays – will increase 7% in 2021 and 4.1% next year. And if that happens, the average PCE will grow by more than 4% in eight successive quarters for the first time since the 1990s, the article further stated.

Not only pent-up demand but also financial aid from the government would result in strong consumer spending in the days to come. Recently, the Senate passed the $1.9-trillion coronavirus stimulus package of the Biden administration. The aid is soon expected to get signed into law and that means as part of the stimulus package, Americans will get $1,400 checks, which in turn should lead to an uptick in spending.

Moreover, the labor market has started showing signs of recovery. After several months of a lean period, hiring picked up in February. Per a Wall Street Journal article, the Labor Department stated that the United States added 379,000 jobs in February followed by 166,000 job additions in January. While job additions last month easily beat expectations, the jobless rate ticked down to 6.2% mostly due to the relaxing of various shutdown measures and the declining number of coronavirus cases(read more: 5 Top Staffing Stocks to Win Big on Blowout Jobs Report).

Interestingly, the employment boom is expected to continue in the near future as economic recovery has begun, with both the manufacturing and service side of the economy showing continuous signs of expansion. Thus, an increase in employment can easily lead to a higher rate of consumer outlays.

At the same time, consumers at present are confident about their well-being, a tell-tale sign that things are looking up for consumer stocks. Consumers’ confidence in the United States jumped to a three-month high in February, thanks to upbeat labor market conditions and economic progress. Per the Conference Board, as mentioned in the PRNewswire article, its index of consumer confidence came in at 91.3 in February versus January’s reading of 88.9. Most importantly, the Present Situation Index increased in February, with Lynn Franco, Senior Director of Economic Indicators at The Conference Board stating that “after three months of consecutive declines in the Present Situation Index, consumers’ assessment of current conditions improved in February.”

Thus, the renewed strength in consumer spending will undoubtedly boost consumer discretionary stocks now and in the near future. We have, thus, selected five such stocks that possess a Zacks Rank #1 (Strong Buy) or 2 (Buy) and should make meaningful additions to your portfolio.

Crocs, Inc. (CROX - Free Report) is one of the leading footwear brands with its focus on comfort and style. The company currently has a Zacks Rank 1. The Zacks Consensus Estimate for its current-year earnings has climbed 31.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 20.9%.

Delta Apparel, Inc. (DLA - Free Report) is a vertical manufacturer of knitwear products for the entire family. The company currently has a Zacks Rank 1. The Zacks Consensus Estimate for its current-year earnings has risen 25% over the past 60 days. The company’s expected earnings growth rate for the current year is 217.7%.

RentACenter, Inc. (RCII - Free Report) is the largest rent-to-own operator in the United States, offering durable goods such as consumer electronics, appliances, computers, furniture and accessories. The company currently has a Zacks Rank 1. The Zacks Consensus Estimate for its current-year earnings has moved up 41.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 49.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Malibu Boats, Inc. (MBUU - Free Report) operates as a designer, manufacturer and marketer of sport boats primarily in the United States. The company currently has a Zacks Rank 1. The Zacks Consensus Estimate for its current-year earnings has moved 15.3% north over the past 60 days. The company’s expected earnings growth rate for the current year is 69.3%.

Kontoor Brands, Inc. (KTB - Free Report) is an apparel company. It designs, manufactures and distributes products. The company currently has a Zacks Rank 2. The Zacks Consensus Estimate for its current-year earnings has risen 8.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 39.9%.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>