Here's How Americans Are Regaining Confidence: 5 Picks

U.S. consumer confidence gained in May, suggesting that the worst of the coronavirus-driven economic deterioration is probably a matter of the past. The economy was shut down in mid-March and marked the deepest contraction in the first quarter since the Great Recession.

Consumer spending is very important for U.S. economic wellbeing as it contributes 70% of the U.S. GDP.A measure of consumer confidence jumped to 86.6 this month from 85.7 in April, according to the Conference Board. Economists polled by Dow Jones had expected consumer confidence of 82.3 in May.

Agreed, the Conference Board survey’s present situation measure has fallen to 71.1 this month from 73.0 in April. But the expectations index based on consumers’ short-term outlook for income, business and labor market conditions climbed to 96.9 from a reading of 94.3 in April.

A few days back, the University of Michigan’s U.S. consumer sentiment index also came in at 73.7 for May, up from 71.8 in April and way higher than the Dow Jones estimate of 65. Bank of America has also started to see consumer spending inch higher after plummeting with the start of the coronavirus lockdown.

The improved sentiment is reflected in the homebuilding sector asconfidence among U.S. single-family homebuilders rose in May with the National Association of Home Builders/Wells Fargo Housing Market Index rising seven points to 37 this month after a record decline in April. Sales of new U.S. single-family homes increased by 623,000 last month, beating estimates of 490,000, according to Dow Jones.

How Confidence Is Being Shored Up

Economic Stimulus

A super-dovish Fed and the government stimulus made this rebound in sentiment possible. Congresshasalready passed about $3 trillion in rescue funds and isplanning another round, has gone a long way in protecting U.S. consumer sentiments.

The U.S. government is now considering The Heroes Act worth $1 trillion. The act intends to provide funds to state, local, territorial and tribal governments that need funds to pay key workers. Funds will also be there for treatment and research. There could be second round of payments through a $1,200 stimulus check.

Along with some analysts, we too believe that the CARES relief checks and widespread price discounting boosted attitude toward buying and probably led to the optimism.  According to a new survey from Piper Sandler, about 47% of the respondents said recently that they will head to restaurants as soon as they reopen.

Vaccine Hopes

The hope for COVID-19 vaccines is also acting as a tailwind. The World Health Organization has recognised some 10 prime candidates as potential vaccines. These candidates include mRNA-1273 vaccine by Moderna Inc. MRNA, ‘ChAdOx1 nCoV-19’ from Oxford University (which is showing limited success as of now), Beijing-based Sinovac Biotech’s candidate PiCoVacc, RNA vaccine candidate from the collaboration of U.S.-based Pfizer and German pharmaceutical company BioNtech, and DNA-based vaccine from INOVIO Pharmaceuticals INO.

Also, U.S.-based Novavax NVAX said lately that it has started human testing of its coronavirus vaccine candidate, and expects preliminary results for the trial in July. There are more than 100 candidates lying in the pre-clinical stage.

Stock Picks

Against this backdrop, below we highlight a few top-ranked consumer-oriented stocks that have a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 (Hold),positive earnings estimate revision of at least 10% for the upcoming year in the past four weeks and greater than 5% price change in the past four weeks.

OneWater Marine Inc. (ONEW)

The Zacks Rank #3 premium recreational boat retailer, principally in the United States, comes from a favorable Zacks industry (placed at the top 28% of total 250+ industries in the Zacks universe). Earnings estimates went up by 571.4% in the past four weeks. Price has risen 115.6% past month.

BG Foods Inc. (BGS)

The Zacks Rank #1 manufacturer and seller of shelf stable, frozen food and household products hails from a favorable Zacks industry (top 15%). Earnings estimates went up by 19.12% in the past four weeks. Shares have added 17.8% past month.

Calyxt Inc. (CLXT)

The Zacks Rank #2 consumer-centric, food- and agriculture-focused company belongs to afavorable Zacks industry (top 27%). Earnings estimates went up by 10.3% in the past four weeks. Shares have gained 6.6% past month.

MEDIFAST INC (MED)

The Zacks Rank #2 Medifast produces, distributes and sells weight loss and other health-related products. It hails from afavorable Zacks industry (top 15%). Earnings estimates went up by 25.86% in the past four weeks. The stock has gained 35.9% past month.

Purple Innovation Inc. (PRPL)

The Zacks Rank #2 designer and manufacturer of products which include mattresses, pillows and cushions, using its patented Hyper-Elastic Polymer(R). The company comes from a favorable Zacks industry (top 26%). Earnings estimates went up by 79.17% in the past four weeks. Shares have gained 36.6% past month.

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Moderna, Inc. (MRNA) : Free Stock Analysis Report
 
Novavax, Inc. (NVAX) : Free Stock Analysis Report
 
BG Foods, Inc. (BGS) : Free Stock Analysis Report
 
MEDIFAST INC (MED) : Free Stock Analysis Report
 
Inovio Pharmaceuticals, Inc. (INO) : Free Stock Analysis Report
 
Calyxt, Inc. (CLXT) : Free Stock Analysis Report
 
PURPLE INNOVATION, INC. (PRPL) : Free Stock Analysis Report
 
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