50 Reasons to Take the American Consumer Seriously

A critical part of the economy demands attention

   

50 Reasons to Take the American Consumer Seriously

Power to the people. Specifically, the American consumer.

There’s a simple reason why the June retail sales report dominated the headlines Mongay and that’s because the American consumer has an outsized impact on the economic recovery. In fact, consumer spending accounts for some two-thirds of the U.S. economy.

So many were disappointed to hear that consumers curtailed their spending in June. Retail sales climbed 0.4%, less than half the 0.9% jump economists were expecting. Excluding vehicle and gasoline sales, retail sales actually declined 0.1%, the first such dip in a year. These lukewarm results have prompted some economists to cut their second-quarter GDP growth forecasts.

Does that mean that we should avoid retailer and consumer stocks wholesale? Not by a long shot. What happened in June was a delayed response to 2013 tax increases. Some industries were hit harder than others, most notably home improvement stores, food service and department stores. Meanwhile, a handful of retailers are still flying high.

Last week we received June same-store sales data from 11 of the nation’s top retailers. Excluding drug stores, the group reported a 5.9% rise in sales—above the 4.8% consensus estimate. And the two retail stocks that I have recommended for Blue Chip Growth posted 6% and 7% same-stores growth, also trouncing consensus estimates.

It is clear that while consumers are being careful with where they spend their money, there are still pockets of strength. So as we progress through second-quarter earnings season, I recommend that you screen all of your consumer plays through Portfolio Grader. This week alone, we’re receiving the latest quarterly results from big names like:

  • Credit card players American Express (AXP) and Capital One Financial (COF).
  • Online retailers eBay (EBAY) and Overstock.com (OSTK).
  • Food service companies like Chipotle Mexican Grill (CMG).
  • Home improvement retailers like Sherwin-Williams (SHW).

And there’s much more to come in the following weeks. To get ready, here are 50 household names—many of them tied to the American consumer—that have been upgraded and downgraded this weekend. After taking a close look at the latest data on institutional buying pressure and each company’s fundamental health, I decided to revise my Portfolio Grader recommendations for each of the stocks listed below.

Upgrades

Last Week’s Holds, Now Buys

Symbol Company Name Quantitative Grade Fundamental Grade
AMAT Applied Materials B D
AME Ametek B B
BBY Best Buy B C
BCS Barclays PLC B C
EBAY eBay B C
MUR Murphy Oil B C
SYT Syngenta B B
TYC Tyco International B C
WYNN Wynn Resorts B B

Last Week’s Sells, Now Holds

Symbol Company Name Quantitative Grade Fundamental Grade
A Agilent Technologies D C
AMZN Amazon.com C C
CCL Carnival D C
CHU China Unicom (Hong Kong) Ltd. D B
DE Deere D C
EEP Enbridge Energy Partners L.P. C D
ERIC Ericsson ADR C D
FLR Fluor D C
HMC Honda Motor Co. C D
HOT Starwood Hotels & Resorts Worldwide D C
INFY Infosys Ltd. D C
KO Coca-Cola D C
PRGO Perrigo D C
SIAL Sigma-Aldrich D C
TRP TransCanada D C
WFM Whole Foods Market D B

Downgrades

Last Week’s Buys, Now Holds

Symbol Company Name Quantitative Grade Fundamental Grade
DEO Diageo C B
LLY Eli Lilly C B
MCK McKesson B C
PAYX Paychex C C
PHG Royal Philips NV B D
SBUX Starbucks C B
TGT Target C C
WFC Wells Fargo C B

Last Week’s Holds, Now Sells

Symbol Company Name Quantitative Grade Fundamental Grade
APC Anadarko Petroleum D C
BEN Franklin Resources D B
DO Diamond Offshore Drilling D C
EIX Edison International D B
ESRX Express Scripts Holding D B
HAL Halliburton D C
HCN Health Care REIT C D
KMP Kinder Morgan Energy Partners D C
NE Noble Corp. D C
UAL United Continental Holdings D C
VZ Verizon Communications D C
WMT Wal-Mart D C
YUM Yum! Brands D C

Article printed from InvestorPlace Media, http://investorplace.com/2013/07/50-reasons-to-take-the-american-consumer-seriously-apc-ben-do-eix-esrx-kmp/.

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