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Top 5 Mid-Cap Consumer Discretionary Stocks With Strong Upside

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Wall Street has maintained its rally so far in 2021 despite heightened volatility in May. Most of the market participants and financial experts are busy talking about the performance given by the large and small-cap stocks. However, the stellar show by the mid-cap (market capital > $1 billion and < $10 billion) stocks cannot be ignored.

Year to date, the three large-cap specific indexes — the Dow, the S&P 500 and the Nasdaq Composite — have gained 12.1%, 11.5% and 6%, respectively. The small-cap benchmark Russell 2000 has surged 11.7%. However, the mid-cap centric S&P 400 has rallied 16.3% year to date second only to another small-cap specific S&P 600 Index that has jumped 19.2% during this period.

Importance of Mid-Cap Stocks

Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine the attractive attributes of both small and large-cap stocks. Top-ranked mid-cap stocks have a high potential to enhance their profitability, productivity and market share and may become large-caps in due course of time.

If the economic recovery has slowed due to any unforeseen internal or external disturbances, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure.

On the other hand, if the crisis doesn’t worsen due to vaccination, these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to the capital markets.

Importance of Consumer Discretionary Sector

The consumer discretionary sector comprises businesses that sell goods and services, which are considered non-essential by consumers. These are the products that consumers can avoid without any major consequences to their well-being. In fact, these goods are desirable only if the available income of an individual is sufficient to purchase them.

Massive nationwide deployment of COVID-19 vaccines is the basis for the faster-than-expected reopening of the U.S. economy. On May 4, President Joe Biden announced that the latest target of his administration is to get 70% of U.S. adults receive at least one dose of a COVID-19 vaccine and have 160 million adults fully vaccinated by Jul 4.

Moreover, Americans have a gigantic $2.3 trillion of excess or forced savings from their locked-in period. Massive pent-up demand together with unprecedented personal savings should drive consumer spending in discretionary products in the near future.

Our Top Picks

We have narrowed down our search to five mid-cap consumer discretionary stocks that have provided double-digit or near double-digit returns in the past three months.

These stocks have strong growth potential for the rest of 2021 and witnessed robust earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past three months.

Crocs Inc. CROX designs, develops, manufactures, markets and distributes casual lifestyle footwear and accessories for men, women and children worldwide. It offers various footwear products, including clogs, sandals, flips and slides, shoes, and boots under the Crocs brand name.

The company has an expected earnings growth rate of 76.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 44.9% over the last 30 days. The stock price has jumped 34.9% in the past three months.

Guess' Inc. GES designs, markets, distributes and licenses lifestyle collections of apparel and accessories for men, women and children. It operates through five segments: Americas Retail, Americas Wholesale, Europe, Asia, and Licensing.

The company has an expected earnings growth rate of more than 100% for the current year (ending January 2022). The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the last 30 days. The stock price has advanced 10.1% in the past three months.

International Game Technology PLC IGT operates and provides gaming technology products and services worldwide. It operates in two segments, Global Lottery and Global Gaming.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 30 days. The stock price has climbed 29.5% in the past three months.

Gildan Activewear Inc. GIL is a manufacturer and marketer of premium quality branded basic activewear for sale principally into the wholesale imprinted activewear segment of the North American apparel market.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 24.7% over the last 30 days. The stock price has rallied 15.3% in the past three months.

Sturm, Ruger & Company Inc. RGR designs, manufactures and sells firearms under the Ruger name and trademark in the United States. It operates in two segments, Firearms and Castings.

The company has an expected earnings growth rate of 17.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 31% over the last 30 days. The stock price has surged 9.6% in the past three months.

+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities

In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.

Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.

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Guess, Inc. (GES) : Free Stock Analysis Report

International Game Technology (IGT) : Free Stock Analysis Report

Sturm, Ruger & Company, Inc. (RGR) : Free Stock Analysis Report

Crocs, Inc. (CROX) : Free Stock Analysis Report

Gildan Activewear, Inc. (GIL) : Free Stock Analysis Report

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