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Consumer confidence rose appreciably in September, reflecting the strength of domestic consumption. This is an indication that the economic recovery will continue at a steady pace. Additionally, the country seems to be largely unaffected by the upcoming elections, dispelling concerns over any uncertainty.

Ahead of the holiday season, it seems that the engine of U.S. growth will continue to perform satisfactorily. This makes it a good time to pick stocks likely to benefit from growing optimism among consumers.

Confidence Rises to Nine Year High

Consumer confidence increased from the level of 101.8 recorded in August to 104.1 in September. This was the highest level recorded since Aug 2007, which is usually considered to be the beginning of the recession which extended over the next two years. Augusts’ reading for the current year was revised upward.

Almost all the details of the current report are encouraging. The Present Situation Index increased from 125.3 to 128.5. Also, the Expectations Index rose from Augusts’ level of 86.1 to 87.8. Meanwhile, the share of respondents who believe that jobs are plentiful moved up from 26.8% to 27.9%.

Upbeat Job Market, High Presidential Approval

A buoyant job market is making a real difference to consumer confidence, as is borne out by this report. Following a disappointing jobs report for August, the employment rate stood unchanged at 4.9% instead of declining as was widely expected. However, this rate is still marginally shy of half of the peak of 10% achieved during the last recession.

Additionally, the last two years have been the best for job growth in nearly 17 years. Low fuel prices have also been aiding the situation. They have helped to increase purchasing power and made more money available for other purchases.

Also, President Obama’s ratings have increased to 53%, according to a Gallup survey. This is significantly higher than the level of 40 recorded two years ago and is another indicator of the optimism prevailing in the economy. There was some concern that an election may have led to an unwelcome uncertainty. Now such thoughts can easily be ignored.

Our Choices

Buoyant consumer confidence means that the economy is likely in fine fettle. A strong jobs market and high presidential ratings are indications of a similar situation.

Picking stocks benefiting from a buoyant consumer looks like a good option at this point. However, picking winning stocks may prove to 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. 

Francesca's Holdings Corporation (FRAN - Free Report) is a specialty retailer of women's apparel products.

Francesca's Holdings has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. The company has expected earnings growth of 8.9% for the current year. Its earnings estimate for the current year improved 14.4% over the last 30 days.

Summer Infant, Inc. (SUMR - Free Report) is a designer, marketer and distributor of branded durable juvenile health, safety and wellness products which are sold principally to large U.S. retailers.

Summer Infant has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of more than 100% for the current year. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 14.35, lower than the industry average of 14.63.

Central Garden & Pet Company (CENT - Free Report) is a leading producer and marketer of premium and value-oriented products focused on the lawn & garden and pet supplies markets in the U.S.

Central Garden & Pet has VGM Score of B. The company has expected earnings growth of 61.7% for the current year. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

JAKKS Pacific, Inc. (JAKK - Free Report) is a multi-brand company that has been designing and marketing a broad range of toys and consumer products.

JAKKS Pacific has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of 9.4% for the current year. It has a P/E (F1) of 11.09, which is lower than the industry average of 23.91.         .

Party City Holdco Inc. (PRTY - Free Report) designs, manufactures, contracts for manufacture and distributes party goods.

Party City has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of 21.6% for the current year. Its earnings estimate for the current year improved by 0.1% over the last 30 days.

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