The latest Wall Street survey of U.S. shoppers conducted by investment bank Jefferies indicates that consumer-facing stocks are well-positioned for the current economy. The survey of over 1,000 U.S. consumers revealed that spending behavior varies significantly across different income groups, leading to a potential “bifurcated recovery.” Higher-income individuals are showing resilience in their spending, while value-seeking behavior is prevalent due to years of elevated inflation. Jefferies identified Consumer staples giant Procter & Gamble and Mexican beer company Constellation Brands as top ways to play the current economy, as they are less exposed to consumers trading down to cheaper alternatives.
Procter & Gamble has been viewed as a solid consumer play that can perform well regardless of the economic environment. While facing volume declines in the past, the company showed a positive sequential improvement in its most recent report. On the other hand, Constellation Brands’ Mexican beer brands have been gaining market share despite industry softness. While there is a concern that the company’s upcoming earnings report may miss expectations, factors like the summer season and supermarket expansion could drive its stock higher. Jefferies also highlighted TJX Companies as a favorite stock benefiting from consumers trading down, as off-price retailers continue to see strong traffic trends.
Another company not mentioned by Jefferies but highlighted as a good investment choice is Costco. The retailer’s ability to offer great bargains on a limited assortment of goods has contributed to its success, with traffic remaining strong and an all-time high stock price. Best Buy was mentioned as a favorable option in the consumer electronics replacement cycle, as the company is expected to benefit from an artificial intelligence upgrade cycle for personal computers. CEO Corie Barry noted that AI-enabled PCs should drive company growth, leading to a surge in the stock price.
While spending expectations for the houseware, furniture, and appliances category were not favorable according to the survey, analysts still see potential in Best Buy as a way to play the consumer electronics replacement cycle in the second half of the year. The company’s stock has seen a surge recently in anticipation of growth from the artificial intelligence upgrade cycle for personal computers. Overall, the survey results suggest that consumer-facing stocks are in a strong position for the current economy, with companies like Procter & Gamble, Constellation Brands, TJX Companies, Costco, and Best Buy being highlighted as top investment choices.
