Consumer confidence hit a new 17-year peak on Tuesday, indicating that the American consumer is entering the holiday season in high spirits. The metric has been enjoying a long stretch of encouraging readings and breached a landmark in September only to better that record last month.
Fuelling consumers’ optimism is an improving jobs market and a strong economy. Specifically, consumers have been enthused by a continually improving labor market. This is possibly one of the best phases to invest in select consumer discretionary stocks.
Confidence Rises for Fifth Straight Month
In October, consumer confidence increased from an upwardly revised level of 126.2 to 129.5. In the process, it exceeded the estimated level of 123.9. This is the highest level achieved since the reading of 132.6 recorded in November 2000. It also improves on last month’s initial reading of 125.9, which was, at the time, the highest level in 17 years.
During the fifth straight month of gains, the present situations index advanced from 152 to 153.9 while the expectations index increased from 109 to 113.3. A large part of this strong optimism can be attributed to consumers’ views on the job market. The section of consumers who expect job openings to increase over the next few months increased from 18.7% to 22.6% in November.
Improving Labor Market, Economic Strength Boost Sentiment
Indeed, the job market has been going from strength to strength in recent months. In October, the United States created 261,000 jobs in October while the unemployment rate came declined from 4.2% to 4.1%. With the exception of September, when the economy generated only 18,000 jobs, average job additions have consistently remained above the 150,000 mark through the year.
Further, Lynn Franco, The Conference Board’s Director of Economic Indicators said consumers “foresee the economy expanding at a healthy pace into the early months of 2018.” Such an outlook is supported by third quarter GDP data released last month.
According to the Department of Commerce’s initial estimate, the economy expanded at 3% in the third quarter, despite the fear that hurricanes Irma and Harvey would impact production levels. The second estimate, due for release tomorrow, is projected at a higher level of 3.3%.
Our Choices
Given the increasing level of optimism, consumers are likely to enter the holiday season on a buoyant note. Spending levels are likely to rise as a result, which is only likely to boost economic growth even higher.
Adding consumer discretionary stocks to your portfolio 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, each of which has a Zacks Rank #1 (Strong Buy) and a good VGM score. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Weight Watchers International, Inc. WTW is the largest provider of weight control programs in the world.
Weight Watchers International has a VGM Score of A. The company has expected earnings growth of 65% for the current year. The Zacks Consensus Estimate for its current-year earnings increased 10.4% over the last 30 days.
Cumulus Media Inc. CMLS is a radio broadcasting company focused on acquiring, operating and developing radio stations in mid-size radio markets in the United States.
Cumulus Media has a VGM Score of A. The company has expected earnings growth of 82.2% for the current year. The Zacks Consensus Estimate for its current-year earnings increased 66% over the last 30 days.
SodaStream International Ltd. SODA is engaged in the manufacture and sale of home beverage carbonation systems.
SodaStream has a VGM Score of B. The company has expected earnings growth of 42.8% for the current year. The Zacks Consensus Estimate for its current-year earnings increased 6.9% over the last 30 days.
Century Casinos, Inc. CNTY is involved in the casino entertainment business on a global scale.
Century Casinos has a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings increased 5.6% over the last 30 days.
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