Consumer spending makes up about 70% of the U.S. economy, according the Federal Reserve Bank of St. Louis. And that money goes to more than just the stores and product manufacturers.
It also is the heart of the tax base for municipal, state and federal governments. It drives the entire nation.
When it’s sluggish, it’s not an encouraging sign. But when it picks up it’s time to start paying attention. Usually, defensive stocks reside in the consumer staples sector. That’s because when spending gets tight, consumers will give up bigger ticket items first and continue to rely on the little luxuries of name brand household products.
When the economy is expanding, however, that’s when you want to start looking to consumer discretionary stocks, like the ones featured here. They gain strength when consumers start to feel more comfortable buying nicer things for themselves, or things that will improve their quality of life.
Following are seven consumer stocks that will knock your socks off.
Consumer Stocks: Thor Industries (THO)
Thor Industries, Inc. (NYSE:THO) is one of biggest players in the North American recreational vehicle (RV) sector.
Started in 1980 with the purchase of the iconic Airstream brand, the company went public in 1984. Since then it has bought up a number of other major brands and launched its own brand as well. It is now a major player in both towable and motorized RVs.
This is a growing trend with retirees. With children spread across the country, it makes it easier to travel around from one place to another without relying on airplanes, security, hauling bags, etc. It allows for a sense of freedom of movement when time is not a core concern.
Another powerful trend in this direction is the fact that many baby boomers were planning to retire when the markets collapsed and these people saw much of their retirement savings slashed, or they were forced to tap into them to make it through. That left less of a nest egg for the golden years.
RVs have become a new opportunity to sell the house and other assets and roam the country. Tens of millions of baby boomers are seeing the attraction to not getting stuck in a house where you have to pay for upkeep, etc.
Consumer Stocks: Capella (CPLA)
Capella Education Company (NASDAQ:CPLA) has spent the past 20 years becoming one of the most respected online post graduate learning companies in the U.S. This is once again a growing industry now that some of the less credible players have imploded or fallen apart.
Online learning is now coming into its own, even major universities are developing online coursework and specialized programs.
CPLA has been around for all of this. Because of its foundational efforts in this sector, it knows the business well and knows how to deliver quality products to its customers. This is crucial because many times large educational institutions don’t have the kind of for-profit mindset to put the customer first and develop a product that provides real value to the customer.
Earlier this week, CPLA announced its fourth-quarter and full-year numbers for 2016, and they showed solid growth. And with growing numbers of workers looking to expand their skill sets as the workforce becomes more competitive — and lucrative — business is looking up.
The stock is up 30%-plus in the past six months, and the momentum is just kicking in.
Consumer Stocks: China Lodging Group (HTHT)
China Lodging Group, Ltd (ADR) (NASDAQ:HTHT) is one of China’s biggest hotel operators. According to its Q3 report in November, HTHT has 3,200 hotels in operation, which the company either leased and owned, franchised or “manachised.”
By far the biggest proportion of hotels fall into the unique latter category. Basically, manachised means the hotels are franchised properties where HTHT provides the management. This allow investors to operate the hotels with experienced staff from day one. It also means HTHT can grow much faster if it isn’t having to put significant time and capital to work building new properties.
And the strategy continues to pay off. It is the second largest hotel company in China, including all the major U.S. brands.
The stock is up 107% in the past 12 months, but this is really the beginning of its journey. The Chinese economy is still not fully recovered. Growth is returning, but it’s slow going. As that growth accelerates, so too will HTHT.
Consumer Stocks: MGM Resorts (MGM)
MGM Resorts International (NYSE:MGM) is one of the leading gaming resort companies in the world. But that hasn’t been a very compelling calling card for a while.
First there was the financial meltdown and ensuing worldwide recession. That hurt growth, especially in the U.S. market (think Las Vegas). Then came the Chinese crackdown in the biggest casino growth story on the planet — Macau.
And these issues don’t even take into account the growing competition with online and offline gambling.
The point is, MGM, as well as its competitors have taken a beating for a while. But, the good news is, MGM have been putting together solid quarters for the past year now. Macau is back in full swing, MGM has found a way into online gaming in some states and resort gaming in others.
What’s more, Japan has been making noises that it may launch its own casino efforts. That would surely be a boon for MGM.
Consumer Stocks: Tarena (TEDU)
Tarena International Inc(ADR) (NASDAQ:TEDU) is one of China’s leading online and live teaching groups. It offers live distance instruction, in-class tutoring, and learning modules.
Most of its growth at this point comes from the 10 IT classes it teaches. Many of the young and upwardly mobile Chinese millennials are looking to move away from the manufacturing jobs that helped China become a major economic force and move into the jobs that will sustain the economy moving forward.
TEDU is built to serve this need. With classes ranging from Android, iOS, Linux, C++ and Big Data, students can build their skills and offer them to local as well as international firms looking for technically proficient developers.
Another amazing thing about TEDU is the fact that while the stock is up 68% in the past 12 months, it is still delivering an impressive 3.9% dividend yield. You don’t see that on many small tech firms.
Consumer Stocks: MakeMyTrip (MMYT)
MakeMyTrip Limited (NASDAQ:MMYT) is a unique company in a unique market. It is basically an Indian OTA (online travel agency) that is publicly traded in the U.S.
Generally, Indian companies don’t trade in the U.S. for a variety of reasons. But it’s not just the fact that we can buy MMYT that makes it worth buying. It’s in a compelling sector that is growing in every major nation around the world, including India.
And at this point, India’s travel industry is growing faster than the U.S. or China. And it’s consolidating, which is a good thing, especially since MMYT is one of the bigger players.
The challenge with investing in India has been the fact that centuries of regionalism have made it difficult for companies to really build out across the entire nation. Now, the internet has solved that issue.
MMYT is up more than 70% in the past six months, and this kind of growth will continue for years to come. And even if competitors move into the market, this homegrown firm will have built some significant barriers to entry at that point. That means if bigger U.S. players want to gain traction in India, it would be smart to buy MMYT — at a very big premium.
Consumer Stocks: Tilly’s (TLYS)
Tilly’s Inc (NASDAQ:TLYS) started in Southern California and has built its growing empire on that vibe ever since. At this point, TLYS has 225 stores in 33 states. It caters to a youth demographic and features clothing and apparel from various stars in skateboarding, motocross and surfing.
There are a number of clothing brands that have been successful exporting this look not only across the U.S., but around the world. And TLYS has found a good formula to build its brand and continue to make money, even in a slow economy.
Its core demographic is still living off mom and dad’s dime for the most part, which means they can use their disposable income to buy cool clothes, without having to worry about buying groceries or paying rent.
As a matter of fact, TLYS has recently been upgraded by a couple analysts in recent weeks. And the stock is up an impressive 74% in the past six months, even before the favorable press.
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.