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U.S. Consumer Spending Bolsters Economic Growth: 5 Picks

Zacks Equity Research

American consumers continue to splurge, a tell-tale sign that the economy is growing at a steady pace. And as consumers continue to remain confident about their well-being, it seems prudent to invest in stocks that are poised to grow on rising consumer spend.

Consumer Spending Rose in November

On Dec 20, the Commerce Department reported that consumer spending rose 0.4% at an annualized rate in November, the best rise since July. American households have been spending heavily on motor vehicles and healthcare.

October’s consumer spending in the meantime remained unchanged. Consumer spending accounts for 70% of economic activity in the United States and has been holding up steady despite the lack of change in retail sales data of late. What primarily support consumer outlays are the 50-year low unemployment rate and a steady rise in wages.

In fact, personal income rose 0.5% in November after rising slight 0.1% (revised) in October and beating the consensus estimate of a 0.3% rise. Moreover, growth in income was the strongest since August. This is evident from the 266,000 job addition in November — the highest since January.

U.S. GDP grew at an annual rate of 2.1% in the third quarter, backed by healthy consumer spending. The resilience of consumers has helped the economy expand for 11 years at a stretch.

Buy These 5 Stocks Now

Further, on Dec 20, the University of Michigan’s consumer sentiment rose to 99.3 for December. This reading is higher than November’s final reading of 96.8, beating the consensus of 99.1, suggesting that consumer spending will rise in the near term.

Given the developments in the U.S. economy, we expect American consumers to help the economy expand. Hence, we have selected five stocks from the motor vehicles and healthcare space where consumers have spent the maximum. These stocks flaunt a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Sonic Automotive, Inc. SAH is an automotive retailer that is engaged in sale of new and used cars and light trucks, and replacement parts; vehicle maintenance; paint and collision repair services and financing, insurance, and other aftermarket services. The company’s expected earnings growth rate for 2020 is 16.1% compared with the Zacks Automotive - Retail and Whole Sales industry’s projected earnings growth of 9.7%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised upward by 6.3% over the past 60 days.

Lithia Motors, Inc. LAD is an automotive retailer that offers new and used vehicles, vehicle financing services, warranties, insurance contracts and vehicle repair and maintenance services in the United States. The company’s expected earnings growth rate for 2020 is 14.3%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised upward by 3% over the past 60 days.

America's Car-Mart, Inc. CRMT is an automotive retailer that primarily sells older model used vehicles and provides financing to customers. The company’s expected earnings growth rate for 2020 stands at 6.6%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised upward by 2.9% over the past 60 days.

DaVita Inc. DVA provides kidney dialysis services for patients suffering from chronic kidney failure or end stage renal disease. Patients can also avail for home-based hemodialysis services. The company’s expected earnings growth rate for the next quarter is 39.6% against the Zacks Medical - Outpatient and Home Healthcare industry’s projected earnings decline of 27.6%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised upward by 10.6% over the past 60 days.

Guardant Health, Inc. GH is a precision oncology company that provides blood tests, data sets, and analytics. The company’s expected earnings growth rate for the next quarter is 30% against the Zacks Medical - Biomedical and Genetics industry’s projected earnings decline of 79.8%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised upward by 30.7% over the past 60 days.

Zacks Top 10 Stocks for 2020

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Click to get this free report Lithia Motors, Inc. (LAD) : Free Stock Analysis Report Sonic Automotive, Inc. (SAH) : Free Stock Analysis Report America's Car-Mart, Inc. (CRMT) : Free Stock Analysis Report DaVita Inc. (DVA) : Free Stock Analysis Report Guardant Health, Inc. (GH) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research