Sometimes in online stock trading you need to read beyond the news and the information filtered through by the media. It’s what you need in the current situation.
Negative News May Not Tell the Whole Story
It’s been quite a stream of bad news that the US stock market has had to face this year, from the sluggish Chinese economy, the terrorist attacks in European and Middle Eastern cities and the sluggish growth in employment in May, to the results of the Brexit referendum and its immediate economic shocks in European and world markets that filtered to the domestic market as well. There were other gloomy headlines as well, but in spite of all that the S&P 500 is actually slightly up from the level it was same time last year. It shows the US economy has been resilient in spite of all the negativity around. Job growth has been strong in spite of May, with wages beginning to rise.
However, the current economic climate is still risky and one can’t discount that. The economic instability in overseas markets could affect the US market as well. For traders it is important that they keep part of their portfolio in steady-growth, high quality, defensive stocks. Consumer staples companies are these kinds of stocks since the products they manufacture and sell will be purchased by people irrespective of the strength of the economy.
Consumer Discretionary Stocks to Consider
But consumer staples are currently overpriced. That’s why consumer discretionary companies can be targeted. Most of these stocks that were caught up in Brexit have been able to bounce back. There are some that are still attractively priced though, and that’s what we are going to look at.
Athletic Shoe Retailer Foot Locker
Foot Locker (NYSE: FL) is the leading global athletic shoe retailer with over 3,400 stores located in 23 countries. It also has an online retail business that is growing and is sure to keep the company on a continuous growth pattern. However, the growth of online sales has not kept Foot Locker from focusing on improving the customer experience in its physical stores. It has focused on choosing better locations and differentiating between various store brands. This has resulted in store sales rising significantly. With Americans ageing, the demand for sports gear has only increased since retirees usually carry out activities such as walking, jogging or exercising to stay fit.
Foot Locker also has a strong cash flow plus low debt. The company trades at just 11.7 times the analysts’ 2016 consensus estimate which makes it a great entry point for people not owning their own shares.
Marine and Recreational Goods Company Brunswick
Brunswick Corp. (NYSE: BC) is a global leader in the manufacture of marine engines and boats, with a wide range of brands under its umbrella. It also manufactures a range of fitness equipment and recreational game products. 80% of the company’s revenue, though, comes from marine products. With its acquisitions, Brunswick has been able to increase market share. It is also beneficial that retirees now have a trend of spending a lot on recreation products, a trend that is set to continue. The low fuel prices have increased marine sales as well. The boating industry would also benefit from the increased home sales in Florida. Brunswick stock is now trading at just 13.4 times analysts’ consensus estimate for earnings per share in 2016.
The only downside to these stocks is that they are dependent on consumer spending, and any economic recession could hurt them.
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