Major U.S. indexes have hit a bump in August after a smooth ride from the beginning of 2023. The bulls are still in control as the S&P 500, the Nasdaq, and the Dow have a positive return of 13.8%, 27.2%, and 4.0%, respectively, so far this year.
The month has witnessed profit booking mostly due to investor fears. Moody’s downgrading of small and medium-sized U.S. lenders and the review of six banks citing funding risks and weaker profitability hit the panic button.
On the brighter side, the Commerce Department on Aug 15 reported that retail sales adjusted for seasonality but don’t account for inflation jumped at the fastest pace of 0.7% in July compared to the prior months’ gain of 0.3%. As inflation continues to soften, online retail spending jumped 1.9%, sporting goods and related stores rose 1.5%, and food and drinks services saw a 1.4% rise.
The Consumer Price Index, which is the most accepted gauge for inflation, rose slightly to 3.2% year on year in July but is way below the 9.1% recorded last summer. The Federal Reserve’s hawkish monetary policy stances to fight inflation have begun to show results after a series of 11 rate hikes since March 2022. However, it seems that the Fed’s 2% inflation target will not be easy to achieve.
The labor market remains resilient for the month of July. Data released by the labor department on Aug 4, shows that U.S. non-farm payroll increased by 187,000, unemployment rates changed a little at 3.5%, and average hourly wage rates gained by 0.4% to $33.74. Over the past 12 months, average hourly earnings have increased by 4.4%. The numbers suggest that the labor market is still tight, boosting consumer spending.
Robust retail sales numbers indicate that consumer spending was broad-based. To ride the tide, we have selected three companies that are expected to perform well shortly from robust consumer spending. Prudent investors can gain from such an opportunity and earn attractive returns by investing in top-ranked stocks like Chuy’s CHUY, Travelzoo TZOO and GIII Apparel Group GIII. These companies hold Zacks Rank #2 (Buy), have a low price-to-earnings ratio (P/E) compared to the industry, and have outperformed the S&P 500 Index year to date.
Chuy’s owns and operates full-service restaurants serving a distinct menu of authentic Mexican food.
CHUY has witnessed the Zacks Consensus Estimate for its current-year earnings increasing 4.6% over the last 60 days.
Chuy’s has a price-to-earnings ratio (P/E) of 20.65 compared with 31.50 for the Retail – Restaurants industry. Its shares have gained 29.9% over the year-to-date period compared with the S&P 500’s rise of 16.5%.
Travelzoo is an Internet media company, which is engaged in the provision of information to subscribers and website users about travel, entertainment, and local deals available from companies.
TZOO has witnessed the Zacks Consensus Estimate for its current-year earnings increasing 2.9% over the last 60 days.
Travelzoo has a P/E of 8.9 compared with 19.20 for the Internet – Commerce industry. Its shares have gained 47.0% over the year-to-date period.
GIII Apparel Group is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private-label brands. The company’s portfolio includes outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage.
GIII has witnessed the Zacks Consensus Estimate for its current-year earnings increasing 2.5% over the last 60 days.
GIII Apparel Group has a P/E of 7.22 compared with 20.80 for the Textile – Apparel industry. Its shares have gained 50.5% over the year-to-date period.
G-III Apparel Group, LTD. (GIII): Free Stock Analysis Report
Chuy’s Holdings, Inc. (CHUY): Free Stock Analysis Report
Travelzoo (TZOO): Free Stock Analysis Report
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