With consumption responsible for over two-thirds of economic growth, the U.S. is a consumer-driven economy. So, everyone is looking to retail numbers for a true sign that the worst is over.
Unfortunately, the cold winter months put a damper on consumer spending. In February, retail sales pulled back 0.6%, which was worse than expected — economists had expected retail sales to be flat.
For the first time since 2012, we’ve seen retail sales fall for three months in a row. Excluding auto, gasoline, building materials and food sales, retail sales were flat in February.
The good news is now that spring is nearly upon us, economists expect Americans to be more willing to go shopping. Also, as rough as the winter weather was, spring cleaning should begin in earnest shortly.
Many homeowners are going to be repairing their homes and sprucing up their yards. So, we should see a rebound in building materials sales, gardening supplies and more.
It also doesn’t hurt that consumers now have more disposable income due to unusually low prices at the pump.
Things are looking up for consumer spending this spring, which presents a buying opportunity for stock investors. However, that’s not to say that I recommend just any retail stock.
A few weeks ago, I explained what you should look for in a healthy retailer — L Brands Inc (NYSE:LB) being a great example of this — and which warning signs you should watch out for in troubled stocks — in this case, Sears Holdings Corp (NASDAQ:SHLD) comes to mind.
Knowing the difference between L Brands and Sears pays off in the long run: If you had invested in LB on Mar. 12, 2014, you’d be sitting on over a 60% gain. If you had purchased SHLD instead a year ago, you’d be faced with a 17% loss.
So, if you’re looking to profit from rebounding consumer spending, I strongly recommend you limit your new buys to only those stocks that are A- or B-rated in my Portfolio Grader tool.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
