Consumers Looking Resilient

At the end of May, the consumer discretionary sector was the only sector to have positive returns through the previous three months. The market has been largely skeptical of consumers since the recession as savings expanded while spending fell. Consumer spending is what normally drives the economy. We can only expect the economy to fully recover once the spending goes back up to normal levels.

The problem lies with current market pricing. Prices for many consumer discretionary stocks have risen significantly. The sector was one of the leaders in 2009 and is by far the best performing sector this year. But why? Consumer spending is still down and gives no reasoning to buy these companies. Consumer confidence and expectations have been up as of late giving reasoning to get more bullish on these stocks. So now the question becomes, where can we find value after the run-up?

There are a few companies I have traded in the past that I quite like: URBN, ARO, GES, and RL. All four of these stocks soared from March until May like the market. The past month has caused problems for the market opening up buying opportunities all over the place. URBN, ARO, and RL have all done well the past month with only URBN being virtually unchanged. This shows the strength of these companies with a chance to get strong companies showing little volatility right now. I think the real chance to make cash money lies with GES. GES was trading around $50 a few weeks ago, but now it trades at $36. I have owned this company a few times. With earnings just released and the market still trading low, this is a perfect time to get back into GES. You can just sit back and watch the cash money being made this summer.