A short list of consumer stocks is uniquely positioned to outperform the market as consumer spending, which accounts for two-thirds of economic activity, remains strong. Even as the economy slows, sales in 2019 should grow of 4%, excluding gasoline and autos, while e-commerce sales could rise 15% for the 10th straight year, according to Kiplinger.
Jefferies favors mostly inexpensive, overlooked stocks such as Capri Holdings Ltd. (CPRI), YETI Holdings Inc. (YETI), Planet Fitness Inc. (PLNT), Acushnet Holdings Corp. (GOLF), and also higher-profile Under Armour Inc. (UAA), as outlined in Barron's. “The group is cheap, under-owned, and Amazon.com is not a threat,” analyst Randal Konik said.
And William Blair, for its part, recommends four consumer stocks that are likely to outperform over the next 60 days, including Lululemon Athletica Inc. (LULU), Fox Factory Holding Corp. (FOXF), At Home Group Inc. (HOME) and Prestige Consumer Healthcare Inc. (PBH), all of the firm expects to post outsized returns in the upcoming months, per another Barron's story.
9 Consumer Stocks With More Upside
- Lululemon Athletica Inc.; 21.6%
- Fox Factory Holding Corp.; 7.6%
- At Home Group Inc.; 21.5%
- Prestige Consumer Healthcare Inc.; -11.7%
- Capri Holdings Ltd.; 17.7%
- YETI Holdings Inc.; 55.4%
- Planet Fitness Inc.; 19.3%
- Acushnet Holdings Corp.; 13%
- Under Armour Inc.; 23.9%
Source: Barron’s, Investopedia
'Get Out of Overpriced Food and Staples'
In a recent note, Jefferies analyst Konik urged investors to “get out of overpriced food and staples stocks and BUY RETAIL,” which he views as undervalued. He said that investor fears are overblown that weak holiday sales indicate a poor 2019.. Konik’s “top longs” include golf ball company Acushnet Holdings and Versace owner Capri Holdings.
Fitness Industry Goes on Sale
Similarly, William Blair selected stocks for its “consumer near-term focus list,” which focuses on stocks expected to rise sharply within two months. William Blair likes shares of athleisure market leader Lululemon, which have already beaten the market significantly, rising over 82% in 12 months and 21.6% YTD through Thursday morning. Analysts expect strong results and upward earnings revisions in the short-term and long-term to provide upside for shares and pave the way for valuation expansion. “Lululemon has an enviable competitive position with a powerful combination of highly productive stores, aspirational proprietary product, a healthy e-commerce channel, and the potential to still more than double revenue as the concept continues to expand around the globe,” wrote William Blair.
Also within the fitness realm, Jefferies likes Planet Fitness, a franchisor and operator of fitness centers that has seen its stock more than quadruple since its IPO in 2015.
Positive drivers for these consumer stocks aside, it’s important to note that even these companies’ profits and stock prices may perform poorly if the economy downshifts too rapidly. They are also vulnerable to a rise in the unemployment rate, which has stayed at historical lows.