10 Consumer Stocks to Put on Your Shopping List

Originally published on U.S. News & World Report, February 11, 2015.

Some investors are loading up their carts with consumer stocks leveraged to the expanding economy.

Falling gas prices have led to rising consumer confidence and, in turn, more money dished on consumer products. As such spending jumps, in theory, so too should stocks associated with those products.

But there’s a cheekier way to view this sequence of events. Maybe the consumer stock scene just needs a little lubricant, like WD-40 (symbol: WDFC).

That’s one pick from the consumer stock basket recommended by Linda Bolton Weiser, senior analyst for consumer products at B. Riley & Co.’s New York office. “CEO Garry Ridge is planning to double sales in 10 years or less by launching sublines such as WD-40 Bike and WD-40 Lawn & Garden,” she says. Additionally, dropping oil prices mean lower costs for the product’s petroleum-based distillates.

Overall, “We’ve recently increased the weightings in our portfolios of U.S. consumer stocks leveraged to this economic expansion,” says John Garvey, senior vice president of wealth management at UBS in Philadelphia. “We see little evidence of a material slowdown in the United States, particularly when you look at accelerating job gains, increased business spending and rising consumer and small-business sentiment.”

Yet that doesn’t mean it’s time for a consumer stock free-for-all. “I would warn investors to stay away from very high-momentum names, like a SodaStream, that are clearly fads,” says Kim Caughey Forrest, vice president and senior analyst, portfolio management at Fort Pitt Capital Group in Pittsburgh. “These companies keep going up based on the belief that sales will increase forever. That works right up to the day it doesn’t.”

What do the other pros think? Here are nine more consumer stock picks worth putting in your shopping basket. Although there are never any money-back guarantees in investing, you can still watch these stocks with all of the anticipation of a Black Friday sale.

Whole Foods Market (WFM). Some experts think the impending March retirement of McDonald’s CEO Don Thompson signals a fast food backlash, which could mean a prime opportunity for outlets such as Whole Foods. “There's a major awakening amongst the public that eating cheap, processed-meat products, shipped frozen around the globe, is probably not healthy,” says Cody Willard. He’s the chairman and all-star trader with New York-based stock social network Scutify and founder of the Trading With Cody website. He holds Whole Foods in his portfolio, noting, “Greasy fast-food joints in particular are in trouble. Selling healthier food to those people puts Whole Foods in a great position.”

General Motors (GM). By all accounts, GM has cruised away from its government bailout in a stronger position, with higher-than-expected earnings for the fourth quarter of 2014 and improved management. “Although GM is still in the process of settling claims relating to defective ignition switches, its outlook is bright, since there’s a pent-up demand for new cars,” says David Kass, clinical associate professor of finance at the University of Maryland’s Robert H. Smith School of Business. “The average age of cars on the road now exceeds the historical average, so they’re likely to be replaced by new vehicles in the near future.”

GameStop Corp. (GME). Calculating the potential of this gaming store chain is a bit like clearing the next level on Mario Kart Wii. The team at Atlas Capital Securities takes into account three scores for value, momentum and short-term reversal (a change in direction of a price trend over the past month). Based on a formula that combines the three, GameStop comes out as a favorite consumer stock, says Jono Tunney. He’s the chief investment officer at Atlas Capital Advisors in San Francisco and co-manager of three portfolios on the Covestor online investing marketplace. As applied to GameStop, “These factors have strong academic evidence showing they are reliable indicators of outperformance over time,” he says.

Urban Outfitters (URBN). The Philadelphia-based company, known for clothing America’s hipsters, has prospects that are anything but low-rent. “It’s been around for decades and has proven itself to be a great merchandiser,” Forrest says. Despite past soft sales at both Urban Outfitters and the Anthropologie chain, she adds, “We believe they will be able to turn these brands around in the next year or so.” At about $36, the stock is exactly where it sat a year ago, so any uptick in sales could affect its share price.

Wal-Mart (WMT). Could low, low prices translate into high, high gains? “I love Wal-Mart, as they offer broad selection, local stores or online ordering, and everyday low prices,” says John O’Donnell, chief knowledge officer of the Online Trading Academy, based in Irvine, California. That’s not his evaluation as a shopper, but a stock shopper: “They’ve dominated the market of big-box stores, continuously outperforming Target and Kmart, and are now taking their superlative supply chain strategies to local neighborhood markets that rival grocery stores,” he says. Convenience stores such as 7-Eleven should look out, too, as Wal-Mart Express has the potential to move in on that market share.

Johnson & Johnson (JNJ). It turns out this company didn’t need a Band-Aid approach after several major recalls of over-the-counter products. “JNJ is a very well-managed and well-diversified company in pharmaceuticals and consumer products, including over-the-counter drugs and health care items,” Kass says, adding that in December 2012, CEO Alex Gorsky came in “and has turned this company around. Its outlook is very bright, and it currently pays a 3 percent dividend.”

Perrigo (PRGO). As prescription drugs move over the counter, Perrigo stands to profit handsomely. It’s the largest store-brand drug company in the U.S. Weiser adds, “The company is relaunching store brand Mucinex this year, in time for the severe flu season. Nexium [a previously prescribed acid reflux drug] will come out soon, and if Lipitor switches to over-the-counter, that would be a big sales opportunity a few years out,” Weiser says.

Amazon (AMZN). It has cheap prices, a ridiculous inventory and free-mail delivery, and someday may be aided by airborne drones. Amazon has led the flight away from brick-and-mortar retail. Online, “Amazon has carved out a sizable portion of the market,” O’Donnell says. “As the market continues to grow, so will Amazon’s revenue. They’ve spent large amounts of cash on investing in new technologies, leading to quarterly losses. However, now that they’re starting to turn profits, I really like their outlook for the future.” And looking to the recent past, the stock was worth $119 in February 2010. Five years later, it’s in the $375 range.

Sony Corp. (ADR). Today, Sony trades in the $26 range, up significantly from a low of $9.74 in November 2012, but still below the $36 it hit four years ago. Despite the fluctuations, Willard says he sees bright prospects. He labels Sony a “revolutionary stock,” based on the company’s track record for shaking up its given industry. Indeed, Sony remains a respected consumer electronics brand (not bad for a company formed in 1946) and as Willard notes, “If you have to invest in a consumer stock, try to find those revolutionary ones."

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