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This category includes retail, auto, construction, restaurants and entertainment, to give a few examples. The idea is that consumers will spend more money when the economy is improving. Consumer sentiment is high and the outlook for growth remains strong. Investing in companies that offer goods to consumers can be lucrative during this cycle.
Let’s look at the best consumer cyclical stocks for 2018 to find the most robust opportunities for prospering from economic expansion. All figures are current as of February 7, 2018.
1. Walt Disney Co.
The force is still with Walt Disney (DIS). The “Star Wars” film franchise continues to pay off. “Rogue One” produced revenues well into 2017, and “Star Wars: The Last Jedi” was released late last year. Disney also sees massive revenue from its Marvel franchise movies. “Thor: Ragnarok” was released in November of 2017, and “Black Panther” will hit theaters next week.
The public seems to be in the mood for entertainment and escape at theme parks, and the new Shanghai Disneyland Park should help boost theme park sales.
Operating income has been increasing for the past four years, and Disney continues to pay a reliable dividend of 1.53%. The stock began a strong and steep upward climb in October 2016 and it held on to its gains through the first four months of 2017. But since hitting its year-to-date peak on April 27, 2017, the stock has declined about 6 percent, to settle at $106.17 on February 6, 2017.
- Avg. Volume: 8,961,061
- Market Cap: $159.166 billion
- PE Ratio (TTM): 18.57
- EPS (TTM): 5.69
- Dividend & Yield: 1.68 (1.53%)
2. Genuine Parts Company
Genuine Parts (GPC) has increased its dividend for 60 years. The company continues to prosper by acquiring other companies, and is now dominating the auto parts industry.
Genuine Parts’ business model and growth prospects make it a potential winner for 2018. Auto parts are in high demand and GPC is the go-to supplier.
Revenues, gross profit and operating income have remained steady for four years. This stock is appealing to investors looking for dividends, safety and some possibility for growth. Shares have been climbing steadily since late 2017 and hit a three-year high of $107.75 on January 26, 2018. The stock closed at $100.06 on February 6, 2018.
- Avg. Volume: 831,346
- Market Cap: $14.752 billion
- PE Ratio (TTM): 22.52
- EPS (TTM): 4.47
- Dividend & Yield: 2.70 (2.64%)
3. General Motors Co.
It is hard to believe that General Motors (GM) was in danger of going out of business eight years ago. Last year, the company announced that it was investing 1 billion new dollars in manufacturing. The investments were intended to support 1,500 jobs. During the last four years, GM has created 25,000 new jobs.
Operating income has been flat for the past four quarters, and the dividend looks to be safe. In fact, the dividend has been growing, with an average yield of 2.66% over the past five years. America’s love affair with the car is far from over, and GM’s stock chart shows that investors are buying shares.
- Avg. Volume: 12,914,020
- Market Cap: $60.211 billion
- PE Ratio (TTM): 20.69
- EPS (TTM): 2.05
- Dividend & Yield: 1.52 (3.71%)
The Bottom Line
If you are going to invest in consumer cyclicals for 2018, it is important to do your due diligence and choose companies that are currently doing well. Never pick a stock simply because it is in a sector that is “supposed” to rise. Choose individual stocks within that sector that are already rising.
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