Credit: Shutterstock photoAccording to the second estimate of U.S. GDP, the economy saw the fastest rate of growth in three years, surpassing expectations. This highlights the economy's resilience toward devastating events like the recent hurricanes. The strength largely comes from vigorous business spending on equipment, a rebound in corporate profits and solid government spending.
Notably, unemployment in the United States is at a 17-year low. Consumer confidence hit a new 17-year high on Nov 28, indicative of a solid holiday season ahead. Consumer spending, which accounts for about 70% of the GDP, showed impressive growth. But, the figure came in lower than expected. This lag was made up by a surge in business investment.
Taking these bullish factors into account, we suggest you place your bet on consumer discretionary and business equipment stocks.
GDP Growth Highest in 3 Years
According to the second estimate, U.S. GDP expanded at 3.3% in the third quarter of 2017, marking the fastest pace of growth since the third quarter of 2014. Per a report by the Commerce Department, consumer spending advanced 2.3% in 3Q17.
However, the biggest boost to the economy came from spending on business equipment, which shot up 10.4% in the period, the highest in three years. Business investment contributed as much as 1.2% toward the U.S. GDP. Further, transportation spending and outlays on software increased in the third quarter.
In her final testimony on Capitol Hill on Nov 29, Janet Yellen commented that economic growth is largely broad based "across sectors as well as across much of the global economy." However, price data in the GDP report clearly indicated that inflation remained well below the targeted 2%. However, the figures have been largely in line with President Trump's goal to boost economic annual growth rate to 3%. This also makes it easier for members of the GOP to implement tax reforms under such economic conditions.
Consumer Confidence Highest, Unemployment Lowest in 17 Years
In October, consumer confidence increased from an upwardly revised level of 126.2 to 129.5, exceeding the estimated mark of 123.9. This is the highest since the reading of 132.6 recorded in November 2000. It also improves on last month's initial reading of 125.9, which was, at the time, the highest level in 17 years.
During the fifth straight month of gains, the present situations index advanced from 152 to 153.9 while the expectations index increased from 109 to 113.3. A large part of this optimism can be attributed to consumer view on the job market. The section of consumers who expect job openings to increase over the next few months increased from 18.7% to 22.6% in November.
Moreover, the job market has been going from strength to strength in recent months. In October, the United States created 261,000 jobs in October while the unemployment rate declined from 4.2% to 4.1%, marking a 17-year low. ( Read More )
Top 5 Consumer Discretionary Stocks to Buy Now
The U.S. economy surged to its best level since 2014, primarily driven by rise in business investment. Moreover, consumer confidence improved indicating higher propensity by consumers to spend on luxury goods.
Further, consumer confidence is at a 17-year high whereas the unemployment is at a 17-year low. This in turn can be attributed to a robust job market. This is why there are ample of reasons to invest in consumer discretionary and business equipment stocks as of now.
With the help of the Zacks Stock Screener, we have zeroed in on four stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and other relevant metrics. A favorable Zacks Rank indicates that these stocks have been witnessing positive estimate revisions, which generally translate into rapid price appreciation. The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Care.com, Inc.CRCM provides online marketplace for finding and managing family care primarily in the United States and internationally. Its platform provides care needs which consists of child care, senior care and special needs care as well as other non-medical family care.
Care.com has a Zacks Rank #2 and a VGM Score of B. The company has an expected earnings growth rate of 181.1% for the current year. The Zacks Consensus Estimate for its current-year earnings increased 29.3% over the last 60 days.
Malibu Boats, Inc.MBUU operates as a designer, manufacturer and marketer of sport boats primarily in the United States. The Company sells its boats under two brands: Malibu and Axis Wake Research.
Malibu Boats has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of 25.1% for the current year. The Zacks Consensus Estimate for its current-year earnings increased 4.3% over the last 60 days.
Cumulus Media Inc.CMLS is a radio broadcasting company focused on acquiring, operating and developing radio stations in mid-size radio markets in the United States.
Cumulus Media has a Zacks Rank #1 and a VGM Score of A. The company has expected earnings growth of 82.2% for the current year. The Zacks Consensus Estimate for its current-year earnings increased 66% over the last 60 days.
H&E Equipment Services, Inc.HEES is one of the largest integrated equipment services companies in the United States. The Company is focused on heavy construction & industrial equipment
H&E Equipment Services has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of 53.3% for the current year. The Zacks Consensus Estimate for its current-year earnings increased 43.8% over the last 60 days. You can see the complete list of today's Zacks #1 Rank stocks here .
Alamo Group Inc.ALG is a designer and manufacturer of agricultural and infrastructural maintenance equipment.
Alamo Group has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of 23.9% for the current year. The Zacks Consensus Estimate for its current-year earnings increased 7.4% over the last 60 days.
5 Medical Stocks to Buy Now
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Cumulus Media Inc. (CMLS): Free Stock Analysis Report
Malibu Boats, Inc. (MBUU): Free Stock Analysis Report
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Care.com, Inc. (CRCM): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
