The 3 Best Consumer Cyclical Stocks to Buy Now
At first glance, the thought of acquiring discretionary retail plays – even the ones labeled as the best consumer cyclical stocks – may seem daunting. Sure, the May jobs report came in much hotter than anticipated, which on the surface bodes well for sentiment. However, some nuances shouldn’t be ignored.
Yes, hiring jumped but so did the unemployment rate. Further, the average hours worked and the pace of wage growth both declined. As well, investors shouldn’t ignore that it’s taking longer for some workers to find new employment opportunities. Overall, this dynamic suggests that employers just aren’t as hard up for workers, which counters the suggestion to buy consumer cyclical stocks.
At the same time, the top consumer cyclical investments might make sense. Fundamentally, not every segment of the income or wealth spectrum experienced the Covid-19 disaster equally. Plus, some international regions’ post-pandemic recovery efforts may be more promising than others. Therefore, we shouldn’t just toss the idea of high-performing consumer cyclical stocks out the window. Yes, it’s a tough market out there, I won’t deny that. However, if speculation runs in your blood, consider these consumer stocks with high returns.
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Vipshop (VIPS)
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Based in China, Vipshop (NYSE:VIPS) is a leading online discount retailer for brands in its home market. Further, the e-commerce platform offers high-quality and popular branded products to consumers at a significant discount to retail prices. Since the beginning of this year, VIPS gained just under 14%.
Fundamentally, consumer spending in China has rebounded, leading to the nation shaking off its Covid-19 downturn. In fairness, some obstacles remain. However, as more people recover fully from the pandemic’s impact, VIPS will be aligned with a burgeoning backdrop. Also, recent efforts to mend ties between the U.S. and China may help make VIPS one of the best consumer cyclical stocks to consider.
Financially, Vipshop still offers a relative bargain despite the performance spike. For example, the market prices VIPS at a forward multiple of 8.73. As a discount to projected earnings, the company ranks better than 84.26% of its peers. Therefore, it’s well worth targeting for top consumer cyclical investments. Finally, analysts peg VIPS as a consensus strong buy. Their average price target lands at $17.57, implying over 7% upside potential.
MasterCraft Boat (MCFT)
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At a cursory glance, MasterCraft Boat (NASDAQ:MCFT) might not immediately seem a viable idea for those who want to buy consumer cyclical stocks. As a leading designer, manufacturer, and marketer of premium recreational powerboats, MasterCraft offers an exciting business. However, the troubling consumer economy would seem to put a dent in MCFT.
Nevertheless, one saving grace here is the wealth gap. With the elites of this country expanding their wealth relative to many other folks, the people that are rich enough to buy recreational powerboats are the ones that have benefitted the most from the public health crisis. From a cynical perspective, MCFT may rise as a potential candidate for high-performing consumer cyclical stocks. Since the start of the year, MCFT gained nearly 11%. Financially, MasterCraft enjoys solid revenue and EBITDA growth. Despite operational strengths, MCFT trades at a multiple of only 8.89, making it considerably undervalued.
Lastly, analysts peg MCFT as a consensus moderate buy. Their average price target hits $35, implying nearly 22% growth. Thus, it could be one of the consumer stocks with high returns.
Hibbett Sports (HIBB)
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If you want to take a massive risk with your best consumer cyclical stocks, Hibbett Sports (NASDAQ:HIBB) makes life interesting. An athletic-inspired fashion retailer, Hibbett features over a thousand stores under the Hibbett Sports and City Gear brands. These stores are located primarily in small and mid-sized communities. However, where circumstances grow cold is the year-to-date loss of over 46%.
Right now, the business suffers from inflation, forcing management to raise prices due to increasing raw material costs. Still, from a fundamental perspective, Hibbett could be interesting in part because of millennial migration trends. Even before the pandemic, millennials began moving to more rural areas because of cost-of-living reasons. This catalyst could help lift HIBB stock (eventually).
On a financial note, Hibbett does seem very attractive. For example, it features strong growth and consistent profitability. Yet HIBB trades at a forward multiple of only 5.02, ranking better than nearly 98% of its peers. To close, analysts peg HIBB as a moderate buy. Their average price target stands at $54.50, implying over 50% upside potential.
On the date of publication, Josh Enomoto did not have (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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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