5 Stocks To Buy On Record Consumer Confidence

Consumer confidence surged during the month of August, indicating that the economy was rebounding after performing poorly during the first half of the year. Cheap fuel prices and a strong jobs market seem to have contributed toward improving the health of the economy substantially.

This release adds to several such reports which are indicating that an economic turnaround in the second half of the year is well underway. For instance, recent data on consumer expenditure had also been encouraging. Adding consumer related stocks to your portfolio would make for a smart choice at this time.

Consumer Confidence Surges

In August, consumer confidence surged to its highest level in 11 months. The index increased by 4.4 points to 101.1, well above the expected level of 97.4, to its highest level since Sep 2015. The present situation index increased from 118.8 to 123, the highest level witnessed since end 2007.

Additionally, the expectations index increased to 86.4, but remained below the highest level achieved since the end of 2008’s recession. But more significantly, the labor market differential, the gap between those who believed that jobs were in abundance and those who thinks jobs are difficult to get, was the highest since Jan 2008.

Buildup of Bullish Data

The labor market differential has a high correlation to official unemployment rate data released by the Department of Labor. The fact that is has become increasingly favorable indicates that unemployment is set to decline further. On Tuesday, Fed Vice Chair Stanley Fisher also provided similar indications about the state of the economy. Fisher said the labor market was extremely close to full employment levels.

Fisher’s optimism about the economy has also been reflected in economic reports released recently. Housing data released this month has been encouraging as have reports on durable goods and industrial production. The only weak spot witnessed this month has been Department of Commerce’s second estimate for second quarter GDP.

However, even the GDP report had a consumer expenditure related silver lining. Household consumption increased on an annualized basis of 4.4%, higher than the rate of 4.2% that was earlier estimated. This is the fastest pace of expansion the metric has experienced since the last quarter of 2014. Consumer expenditure contributed 2.94 percentage points to GDP growth, the highest in more than a year.

Our Choices

Surging consumer confidence is another indicator that the economy is poised to grow stronger in the second half of the year. Low fuel prices and a stronger labor market are also increasing the purchasing power of the economy and in turn fueling economic gains.

This is why it may be a good idea to pick consumer related stocks 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.

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.

Deckers Outdoor Corp. (NYSE:DECK) is a leading designer, producer, and brand manager of innovative, niche footwear and accessories developed for outdoor sports, and other lifestyle-related activities.

Deckers Outdoor 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 15.11, lower than the industry average of 17.51. Its earnings estimate for the current year has improved by 0.5% over the last 30 days.

American Woodmark Corp. (NASDAQ:AMWD) is involved in producing and selling of kitchen cabinets and vanities in the U.S.

American Woodmark has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of 21.6% for the current year. Its earnings estimate for the current year has improved by 11.8% over the last 30 days.

Ralph Lauren Corporation (NYSE:RL) is a major designer, marketer and distributor of premium lifestyle products.

Ralph Lauren has a Zacks Rank #2 (Buy) and a VGM Score of A. Its earnings estimate for the current year has improved by 1% over the last 30 days.

Delta Apparel Inc. (NYSE:DLA) is a vertical manufacturer of knitwear products for the entire family.

Delta Apparel has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. Its earnings estimate for the current year has improved by 3.7% over the last 30 days.

Guess', Inc. (NYSE:GES) designs, markets, distributes and licenses casual apparel and accessories for men, women and children as per the American lifestyle and European fashion sensibilities.

Guess' has a Zacks Rank #2 and a VGM Score of B. Its earnings estimate for the current year has improved by 9.6% over the last 30 days.

Zacks' Best Investment Ideas for Long-Term Profit

Today you can gain access to long-term trades with double and triple-digit profit potential rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>