Last week, the Internal Revenue Service (IRS) deposited around 90 million stimulus payments. So many people saw their stimulus deposit hit last Wednesday that the Wells Fargo & Co. (NYSE: WFC) online banking system couldn’t even handle the traffic. There were also another 150,000 checks mailed last week. The latest batch of direct deposits hit accounts yesterday.
I’m not going to get into the specifics of the stimulus plan, but the reality is that many people now have an extra $1,400 in their bank accounts … and they will most likely spend it.
There is, of course, a wide range of things that people will be spending that extra cash on. But two big sectors that will see an influx are:
1) Consumer staples
2) Consumer discretionary
Consumer staples, of course, are companies that either produce or sell products that people buy on a regular basis. Consumer discretionary are those that are generally considered nonessential but are desirable if there is sufficient income. This includes fast-food restaurants, entertainment products and services, clothing and even automobiles.
These two sectors tend to do well over different parts of the economic cycle. But right now, we have a very divided economy. There are consumers that will use that stimulus for staple goods that they have been struggling to get. And we have consumers that have been more fortunate over the course of the pandemic and will consider this money as being “extra.”
Of course, I’m not saying that every company in each of these sectors will thrive. To investigate which ones you should consider, let’s use the Weiss Ratings stock screener.
When entering consumer staples into the sector search field, I found there were 20 “B”-rated stocks and 29 “B-”-rated stocks. That’s 49 companies currently holding a “Buy” rating. Let’s take a closer look at the top three.
First up is Church & Dwight Co., Inc. (NYSE: CHD). I’ve written to you about this company before, since it’s been “Buy”-rated since 2018. It’s the company behind Arm & Hammer, Spinbrush, Oxiclean, Waterpik … you get the idea. It makes a bunch of products that you probably have in your cabinet.
Many of these products people won’t go without, and they haven’t been going without. But if they’ve scaled back, that extra $1,400 will surely go to some of these brands. Shares are up 37% over the past year.
Next up is Costco Wholesale Corporation (Nasdaq: COST). This is a company that doesn’t really need an introduction nor an explanation. You can buy in bulk at a reasonable price. Costco was essential for many over the past year, and it will surely see some of those stimulus dollars. Shares are up 20% over the past year.
Finally, we have The Hershey Company (NYSE: HSY). The company sells confectionery products and pantry items. Although technically it’s considered a consumer staple, most people would put this under the “if funds permit” section of their shopping list. The company is a solid “Buy,” and shares are up 20% over the past year.
When entering consumer discretionary into the sector search field, I found there were 30 “B”-rated stocks and 46 “B-”-rated stocks. That’s 76 companies with a “Buy” rating. So, let’s take a look at the top three.
First up is Envela Corporation (AMEX: ELA). The company has been around since 1965 and is a holding company engaged in various business activities. Its retail segment buys and sells jewelry and bullion in the United States.
Envela’s commercial services segment provides solutions to a variety of businesses. These services include sustainable ways to reduce waste and helps them protect their intellectual property and brand value. Both segments are hot right now. Shares are up 111% over the past year and 24% over the past six months.
Next up is The Home Depot (NYSE: HD). This one doesn’t need much explaining. You have probably been to one of the orange-box stores over the course of your lifetime. The company did well last year, especially as people found themselves with more time to work on projects they had been putting off.
Now with that extra $1,400 consumers might have, a few more of those projects might be ready to get done. Shares are up 58% over the past year and 11% in the past month.
Finally, we’ve got MarineMax, Inc. (NYSE: HZO). The company is headquartered in Clearwater, Florida, and is the nation’s largest recreational boat and yacht retailer.
MarineMax recently reported first-quarter results of fiscal year 2021. The company saw record December quarter revenue growth of 35%, and diluted EPS more than doubled.
Sounds like people are starting to part with their dollars and put them into outdoor recreation. Shares are up 486% over the past year and up 109% over the past six months.
These are just six of the potential ways to cash in on the stimulus trend.
As always, I suggest you head on over to the Weissratings.com stock screener to see if your favorite consumer staple and discretionary brands are currently screaming “Buy.”
Best,
Kelly Green
