US consumer confidence rose in June to the highest since February 2008, but the question is: When are consumers going to spend a lot more to give the economy a turnaround?
John Faucher, senior analyst at JPMorgan Chase and Linda Bolton Weiser, managing director at Caris & Co. said there are consumer stocks that investors ought to own right now—and a few to avoid.
“What we’re looking for is a ramp up in consumer spending,” Faucher told CNBC. “If you look at the data, the saving data is a little bit of a concern in terms of how much consumers will be spending.”
Faucher told investors to avoid companies that sell expensive products and recommended looking into the basic staple names instead. Faucher also advised investors to look abroad, suggesting Latin America as an option.
“The economies have held up reasonably well,” said Faucher of Latin America. “The consumers look pretty good there and chances are, you’re going to get a weaker dollar, which will also help earnings. We like companies with big international exposure.”
In the meantime, Weiser said prestige cosmetics are currently set at a “relatively low price-point.”
“I think women will return to buying Estee Lauder and Mac cosmetics,” said Weiser. “Improving savings is good, but I think consumers will return.”
Recommendations:
Faucher’s Picks:
Coca-Cola
Pepsico
Colgate-Palmolive
Clorox
Newell Rubbermaid
Kimberly-Clark
Faucher’s Pans:
Brown Forman
Estee Lauder
Weiser’s Picks:
Sally Beauty Holdings
Avon Products
Estee Lauder
Disclosure:
Faucher and his investment banking client owns shares of Coca-Cola. Faucher also has investment banking clients who own shares of CL, CLX, PEP, NWL, EL and BFB.
Weiser does not own stocks from any of the companies mentioned above.
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