What are we looking for?
U.S.-listed consumer stocks with strong returns.
The U.S. consumer cyclical sector has been a market darling over the past year, outperforming all other sectors with a one-year return of 21.5 per cent. Over the past month, this sector has added 5.1 per cent, outperforming all sectors except technology. Low U.S. interest rates have driven spending on both durable and non-durable consumer goods, thereby boosting the top lines of many consumer-product companies.
The screen
We will be using Recognia Strategy Builder to search for U.S.-traded consumer stocks offering strong price performance combined with reasonable valuation and growing earnings.
We begin by looking for companies that have demonstrated a stock price increase of at least 4 per cent over the past four weeks. We also wish to focus on companies with growing earnings. We will screen for companies with projected earnings-per-share growth rates this year of 3 per cent or more compared with last year based on analyst projections.
Last, to ensure we don't overpay for our investments, we will select only stock with forward price-to-earnings ratios of 20 or less. The average P/E ratio of this sector is 29.3.
More about Recognia
Recognia is a global leader in automated quantitative analysis and engagement solutions for retail online brokers and institutions. Recognia's product suite provides actionable trading ideas based on technical and fundamental research covering stocks, ETFs, indexes, forex, options and commodities.
What did we find?
General Motors Co. tops our list with a 16 per cent projected EPS growth rate and extremely low forward P/E ratio of just 5.4. On top of that, the stock provides a 4.9-per-cent dividend yield. On July 21, the company released second-quarter earnings that exceeded analyst expectations by a wide margin and also guided upward on future earnings. Sales in China for the quarter also hit new record levels.
Appliance maker Whirlpool Corp. also makes our list with an amazing stock price run-up in 2016; up 28 per cent year-to-date and almost 15 per cent in the past month. On July 22 the company announced second-quarter results that beat analyst expectations for both revenue and earnings, driven mainly by growth in North American sales.
The highest EPS growth rate on our list belongs to Thor Industries Inc., a maker of recreational vehicles selling under the Airstream, Jayco, Crossroads and other brands. The company currently has a 24-per-cent projected EPS growth rate and a 16.7 forward P/E. Thor Industries' stock is up 37.5 per cent year-to-date and up 13.6 per cent in the past month.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Recognia Inc. in respect of the investment in financial instruments. Investors should conduct further research before investing.
Peter Ashton is vice-president of retail and self-directed investing at Recognia Inc.