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5 Stocks to Buy on 15-Year High Consumer Confidence

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Optimism about the economy increased in December according to the latest reading of the consumer confidence index. This is yet another sign that much of the positive impetus acquired by the economy after the presidential election remains. Clearly, President-elect Trump’s promises of fiscal stimulus, tax cuts and deregulation are hitting the right note with a large section of the populace.   

Meanwhile, other readings also indicate a general improvement in sentiment even as broader economic indicators continue to improve. This makes it a good time to add consumer focused stocks to your portfolios.

Highest Reading Since 2001

According to The Conference Board, the Consumer Confidence Index increased from 109.4 in November to 113.7 this month, hitting the highest level since 2001. The reading also came in above the consensus estimate of 108.6. The gauge of consumer expectations for the six months to follow rose from 94.4 to 105.5. This is the highest reading recorded in 13 years.

Additionally, 23.6% of respondents now expect an improvement in business conditions after six months, higher than the 16.4% recorded last month. This is also the best reading experienced since Feb 2011. Significantly, 21% of respondents now expect their incomes to increase over the next six months compared to 17.4% in November.  

Trump Expected to Deliver on Promises

After an initial hiccup following the surprise verdict, equity markets have warmed to the idea of a Trump administration. Investors expect the new administration to be better for business. Meanwhile, a number of indicators have shown that the economy continues to improve.

Among the most salient of these, unemployment declined to 4.6% in November.  Additionally, GDP increased by 3.5% in the third quarter according to the final reading of the Bureau of Economic Analysis. Moreover, the University of Michigan reported that its consumer sentiment index rose this month to a 12-year high level of 98.2.

According to Lynn Franco, the director of economic indicators at the Conference Board, the increase in optimism about the economy post the election results has been most marked among older consumer. On Monday, Trump claimed credit for the ongoing market rally, indicating that his victory had given rise to fresh hope across the country.

Our Choices

The fresh reading of the consumer confidence index serves to underline the growing feeling of optimism among the majority of consumers. Most economic reports released recently lend weight to such sentiments.

Picking stocks gaining from these trends looks like a smart option at this point.  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.

Tailored Brands, Inc. (TLRD - Free Report) is a specialty retailer of men's suits and provider of tuxedo rental products primarily in the U.S. and Canada.

Tailored Brands has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 14.33, lower than the industry average of 16.22. Its earnings estimate for the current year has improved by 8% over the last 30 days. The stock has returned 78.9% year-to-date, outperforming the Zacks Textile – Apparel sector over the same period.

Francesca's Holdings Corporation is a specialty retailer of women's apparel products.

Francesca's Holdings has a VGM Score of B. The company has expected earnings growth of 15.8% for the current year. Its earnings estimate for the current year has improved by 6.9% over the last 30 days. The stock has returned 7.4% year-to-date, outperforming the Zacks Shoes & Retail Apparel sector, which has returned 11% over the same period. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

Central Garden & Pet has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of 7.7% for the current year. Its earnings estimate for the current year has improved by 3.3% over the last 30 days. The stock has returned 149.3% year-to-date, outperforming the Zacks Consumer Products - Discretionary sector, which has returned 14.4% over the same period.

The Toro Company (TTC - Free Report) is a designer, manufacturer and marketer of consumer and professional turf maintenance equipment, snow removal products and irrigation systems.

Toro has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of 9.9% for the current year. Its earnings estimate for the current year has improved by 0.7% over the last 30 days. The stock has returned 53.4% year-to-date, outperforming the Zacks Tools - Handheld sector, which has returned 16.1% over the same period.

Extended Stay America, Inc. (STAY - Free Report) is the owner and operator of company-branded hotels in Canada and the U.S.

Extended Stay America has gained 2.3% year-to-date, underperforming the Zacks Hotels & Motels sector, which has gained 27.6% over the same period. However, it has a Zacks Rank #2 and a VGM Score of A.  Its earnings estimate for the current year has improved by 0.2% over the last 30 days. It has a P/E (F1) of 17.59, which is lower than the industry average of 23.88. This provides a good opportunity to buy the stock.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>

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