4 Stocks To Buy On Stronger Q1 GDP

It seems that the decline in first-quarter GDP was not as much as was estimated earlier. Fresh figures on Friday reflected a substantial upward revision which indicates that the economy has grown stronger with the arrival of spring. This is in keeping with other reports released recently which suggest that a strong revival is underway.

Apart from an increase in corporate profits, which was the highlight of the Q1 GDP release, consumer expenditure and a rebound in housing continued to boost GDP. This is why it may be a smart option to pick stocks from these sectors at this time.

Q1 GDP Revised Upward

The “second” estimate by the Bureau of Economic Analysis showed that the first-quarter output of goods and services increased at an annual rate of 0.8%, lower than the 1.4% recorded in the fourth quarter of 2015. However, first-quarter GDP data was revised upward from the previously estimated 0.5% rise.

The most notable feature of the report was evidence that corporate earnings were stabilizing. For a long time, this metric has been weighed down by a strong dollar and a downturn in the energy sector. Pretax corporate profits increased by 0.3%, the first sign of growth seen since early 2015.

Personal Consumption, Housing Powering Growth

Viewed as the engine of U.S. GDP, consumer spending was one area which continued to shine. Even though the estimate remained unchanged, personal consumption came in at a healthy 1.9% for the first quarter. Meanwhile, expenditure on new home construction jumped to 17.1% for the first quarter compared with the earlier estimate of 14.8%. This is the largest such increase in around four years.

Other economic indicators have also been providing similar signals. U.S. retail sales rose 1.3% last month, reaching its highest level since Mar 2015. Meanwhile, the final reading of consumer sentiment index released by University of Michigan came in at 94.7 in May to touch an 11-month high.

Our Choices

The U.S. economy has not grown as sluggishly as was earlier apprehended. Consumers continue to power economic growth and the housing sector continues to reflect improvement.

This is why it makes good sense to add stocks to your portfolio which are set to gain from such trends. However, selecting winning stocks may be a difficult proposition.

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.

Hasbro Inc. (NASDAQ:HAS) is engaged in the design, manufacture and marketing of games and toys.

Hasbro has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. The company has expected earnings growth of 16.6% for the current year. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 21.33, lower than the industry average of 23.34. Its earnings estimate for the current year has improved by 0.1% over the last 30 days.

Cable ONE, Inc. (NYSE:CABO) is a provider of Internet, cable television and telephone services primarily in the U.S.

Cable ONE has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. The company has expected earnings growth of 23.6% for the current year. Its earnings estimate for the current year has improved by 25.7% over the last 30 days.

Installed Building Products, Inc. (NYSE:IBP) operates as a residential insulation installer in the United States. It also installs complementary building products, including garage doors, rain gutters, shower doors, closet shelving and mirrors.

Installed Building Products has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of 78.9% for the current year. Its earnings estimate for the current year has improved by more than 9.6% over the last 30 days.

Comfort Systems USA Inc. (NYSE:FIX) is a provider of heating, ventilation and air conditioning installation, maintenance, repair and replacement services in various facilities, including apartment complexes.

Comfort Systems USA has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of 29.5% for the current year. It has a P/E (F1) of 18.74, which is lower than the industry average of 20.72.