With a consumer spending comeback expected, this could be the game plan

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A flush consumer spending could carry some key stocks to new heights, two traders say.

U.S. personal spending in 2021 is expected to grow at its fastest rate in over five years, according to a Federal Reserve Bank of New York survey released Monday.

The rush could boost consumer discretionary stocks including Chipotle Mexican Grill, said Nancy Tengler, chief investment officer at Laffer Tengler Investments.

“We’ve been pounding the table on where the consumer and digitization cross over, so we’re grossly overweighted to consumer discretionary as a firm,” Tengler told CNBC’s “Trading Nation” on Tuesday. She noted that her firm bought into Chipotle in the spring and added to its position after its most recent earnings report when the stock sold off.

Disney made Tengler’s No. 2 spot despite not technically being a consumer discretionary stock. She liked the name as a reopening play, adding that her firm recently included it in its 12 Best Ideas list.

“Those are two places we would play, along with some of the usual suspects like an Amazon or a Target that will benefit from consumers buying at home and also going into the store,” Tengler said.

Investors would do well not to overlook another key driver of consumer spending, said Mark Tepper, president and CEO of Strategic Wealth Partners.

“All the usual suspects — the Walmarts, Targets, Home Depots, Apples of the world — they’re all going to get their fair share of the consumer’s wallet, but the biggest thing I’m hearing from clients, friends, colleagues is how badly everybody wants to travel. There’s a ton of pent-up travel demand,” Tepper said in the same interview.

But with hotel and resort stocks such as MGM already at or near pre-pandemic levels, the opportunities are harder to find, he said.

“You’ve got to do a little bit of homework to find the opportunity, and one name that I like right here is SkyWest,” a regional airline operator, Tepper said.

“I think as vaccine distribution really hits its stride over the course of the next several months, I’d expect regional travel to rebound much faster than international,” he said. “SkyWest … run[s] regional flights for the big three: United, Delta, American. And when we look at the risk-reward profile of SkyWest, it’s much more attractive with them than it is with the mainline airlines. So, I think that would be our way to play this.”

Tengler had her sights set on three stocks in the travel trade apart from theme park operator Disney.

“We also own LUV, Southwest Airlines, and we’ve been taking a really close look at Marriott,” which announced a deal Tuesday to add 19 all-inclusive Caribbean and Central American resorts to its portfolio.

“Marriott and Hilton have had a nice run, but we do think that people will begin to return to travel late this spring and early summer and those companies will benefit,” Tengler said. “In particular, Marriott has an interesting footprint that I think would benefit both domestically and internationally.”

Disclosure: Laffer Tengler Investments owns shares of Chipotle, Disney, Amazon, Target and Southwest Airlines.

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