2023 has been all about inflation, rising interest rates, and slowing consumer spending. While such market ups and downs are a part of life, it looks like we are finally in a better place. Inflation is cooling, market sentiment is positive, and there is an improvement in consumer spending. It is consumer spending that has ensured that the economy remains strong despite the predictions of a recession.
When consumer spending improves, the economy improves and so does the stock market. With the upcoming holiday season, there are several companies set to get a boost from the higher spending. With that in mind, here are the three stocks to buy to enjoy a boost from improved consumer sentiment.
Stocks to buy: Costco Wholesale (COST)
Costco Wholesale (NASDAQ:COST) operates a membership retail model, and had some of its best days during the pandemic. However, inflation had a strong impact on the business, and it struggled this year. The company continues to grow through the increase in memberships while steadily opening new stores.
In the third quarter, the company saw a 5.2% rise in worldwide traffic and a 5% rise in the U.S. year-over-year. It did see a drop in average transaction amount due to the inflation but with the upcoming holiday season, I believe we could see better numbers which makes COST one of the top stocks to buy now.
Most importantly, it saw a 7.9% rise in the membership year-over-year, and if it plans to raise the annual membership fee, we could see an improvement in the bottom line. The revenue came in at $78.9 billion, and the EPS was an impressive $4.86. I believe the worst is over for the company, and it is set to continue growing in the coming year.
Trading at $591 today, the stock is up 30% year-to-date and is very close to hitting a new 52-week high. Yes, the stock isn’t cheap but it has gained significantly in the last five years. It has grown over 150% in the last five years, more than Amazon (NASDAQ:AMZN) which has grown only 73% in the five years. The company also enjoys a dividend yield of 0.69% and pays a quarterly dividend of $1.02.
Costco has remained a market-beating stock that has stability and a steady dividend. The company also has a new CEO who could churn up things and continue the company’s success record. Costco may have suffered in the past, but it has improved significantly in the past few months, and this will give a boost to the stock.
Restaurant Brands (QSR)
Restaurant Brands International (NYSE:QSR) is a company that directly gets a boost from higher consumer spending. Since it owns a large and diversified portfolio of brands including Burger King and Tim Hortons coffee, it enjoys steady and consistent income. Its USP is the diversified brand portfolio which works in its favor whenever the economy improves.
In the recent quarter, the company reported an EPS of 90 cents and a revenue of $1.84 billion. The sales improved 6.4% year-over-year while the same-store sales growth came in at 7% year-over-year. While the numbers were slightly below expectations, the same-store sales growth looks impressive and shows higher growth potential in the long term.
During the pandemic as well as in times of high inflation, we saw consumers looking for affordable fast food options as compared to dining out. Hence, as consumer sentiment improves, we could see them spending more on their favorite food outlets and this is where Restaurant Brands is set to gain.
Trading at $69, QSR stock is highly undervalued and it has tremendous potential for growth. While it is up 7% year-to-date, it is still trading lower than the all-time high of $78 it achieved in 2019. JP Morgan has recently raised the price target of the stock to $74 with a buy rating. I believe QSR will have a better fourth quarter due to the upcoming holidays and travel season.
A dividend yield of 3.17% adds sweetness to the stock and makes it an ideal choice for passive income investors. The company has announced a quarterly dividend of $0.55 and enjoys an annual dividend of $2.20 per share. This is one stock to buy and hold if you want to make the most of improved consumer spending.
One fintech stock that has survived the pandemic, inflation, and increasing interest rates is Visa (NYSE:V). The company has shown impressive growth despite market uncertainty and continues to achieve remarkable success. Visa makes money whenever users spend using the Visa card. With the growing popularity of cashless transactions and credit cards, Visa is set to gain in the coming months.
The company earns a fee from every transaction consumers make and with high ticket purchases, there is a higher revenue. As consumer spending improves, the company will enjoy higher revenue in the coming quarter. It saw a full-year revenue of $32.7 billion, up 11% and the payment volume was up 9% for the year. It is one of the best stocks to buy and hold.
There is no reason to believe that the company’s success will not continue in the coming years. It has a solid merchant network and a strong balance sheet. As it continues to grow the network, it will add more users and generate higher revenue. Visa holds a very strong position in the market which is hard to beat. The digital payment wave is only going to grow stronger in the coming years, and Visa will continue to gain.
V stock is exchanging hands at $254 right now and is up 22% year-to-date. The stock is at its 52-week high and has been steadily moving upwards since the past month. I believe this momentum will continue, and Visa is set to achieve new heights as consumer spending improves.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.