Every few days, I read or hear the news that strongly indicates that the U.S. is not going to undergo a recession in 2023. One of the most recent, startling headlines in this category came from Goldman Sachs, which predicted that even the eurozone would not suffer a recession this year. If the eurozone, which has been hit with far worse inflationary shocks than the U.S., is worried about a huge war near its border and has an unemployment rate that is close to double America’s is not going to experience a recession, I can’t understand how the U.S. is going to have one.
Also in the shocking category was a prediction by Morgan Stanley’s Chief Economist that the American economy would grow by 0.5% this year. That’s pretty amazing because it seems that the most famous, current prognosticator of doom and gloom on the Street is Morgan Stanley’s Chief U.S. Equity Strategist, Mike Wilson. So even a colleague of the Street’s foremost bear is calling for the American economy to expand this year. Anyway, if, like me, you don’t want to ignore all of the signs that fears of a U.S. recession are way overdone, here are seven consumer discretionary stocks to buy now:
Beachbody (NYSE:BODY) is “a health and wellness platform that provides fitness, nutrition, and stress-reducing programs.” It offers digital information on fitness and wellness, along with nutrition products and supplements. Among its products are workout videos and eating plans.
As I’ve written previously, the pandemic made Americans more health-conscious, as it became more apparent to many during that time that obesity and a lack of exercise can be life threatening. BODY is very well-positioned to benefit from that trend.
Moreover, the stock’s valuation is exceptionally tiny, as the shares are trading for just 0.2 times the company’s trailing sales. And finally, the Street was apparently very pleasantly surprised by the company’s recent reiteration of its fourth-quarter guidance, as BODY stock responded to the news by rocketing 25% higher on Jan. 10.
For Q4, the company expects its revenue to come in at $140 million to $150 million.
In a comprehensive review of Beachbody’s 645, at-home fitness program, SI.com wrote that it will ” help you strengthen your lower body, upper body and core, it aims to build muscle and improve mobility throughout your entire bod as one big unit, preparing you for those daily life tasks that rely so heavily on functionality.”
The website added that the program is fun, and SI.com did not have any major criticisms of the offering.
In several recent articles, I’ve recommended MGM (NYSE:MGM) stock, contending that the casino owner is very well-positioned to benefit from Las Vegas’ current and upcoming popularity.
On Jan. 6, investment bank Stifel expressed similar sentiments about Las Vegas and MGM stock, as the firm upgraded its rating on MGM stock to “buy” from “hold.”
The investment bank stated that “At this point we believe the LV Strip momentum should easily continue through 2023 and into 2024 and we see more value with Macau/LV Strip operators versus pure play regional gaming operators.”
Like me, the firm expects MGM to get a major boost from increased business travel to the city this year. Other positive catalysts for the stock include the reopening of MGM’s casinos in China and its superior customer data, Stifel contended.
Moreover, as I’ve pointed out previously, MGM expects its sports betting venture, BetMGM, to start generating positive EBITDA this year.
And MGM stock currently has momentum on its side, as the shares jumped 9.3% in the five trading days that ended on Jan. 10.
Some may oppose my decision to include electric-vehicle charger operator EVgo (NASDAQ:EVGO) on this list of seven consumer discretionary stocks to buy. However, buying EVs, which tend to be more expensive than their gasoline-powered counterparts, is definitely a discretionary decision, and chargers are often used on long trips, many of which are discretionary. As a result, I decided to incorporate EVGO into this column.
I’ve long believed that the company, which says it has “more than 850 fast-charging statins” in the U.S., would get a big boost from the rapid proliferation of EVs. As a result, I bought the stock in 2021.
And the company — which has established a close partnership with emerging EV powerhouse General Motors (NYSE:GM) — reported that its revenue jumped 70% year-over-year last quarter to $10.5 million, as it gained “approximately 54,000 new customer accounts” and the amount of electricity it provided soared 51% year-over-year.
But the stock tumbled from $12.75 in March 2022 to below $4 at the end of last year.
However, in a recent note to investors, investment bank MKM Partners indicated that the plunge of EVGO stock is not based on fundamentals.
The firm says that a “wall of worry” among investors has been heavily weighing on the stocks of companies that, like EVgo, merged with SPACs. As a result, many names that became public by combining with stocks, including EVGO, are undervalued, MKM contended, adding that EVGO stock is ” a can’t miss.”
I agree with MKM’s points, and so did many other investors, apparently, as the shares shot up 23% following the publication of the firm’s note.
Moreover, 33% of EVGO’s shares are being sold short, making it an excellent candidate for a short squeeze.
In a December note to investors, Goldman Sachs reported that food delivery had become “more normative” during the pandemic and that the trend could expand further going forward.
It identified DoorDash (NYSE:DASH), the largest, pure-play food delivery company, as one of the names that could benefit significantly from the proliferation of the food delivery phenomenon.
In addition, it is worth noting is that, in the third quarter, despite the curtailment of the pandemic, DoorDash’s revenue soared 34% year-over-year, while its total orders climbed 27% YOY and its cash flow from operations came in at an impressive $199 million, nearly double the $107 million of cash flow from operations that it generated during the same period a year earlier.
DASH trades at a relatively low forward price-sales ratio of just 2.3 times, and nearly 9% of the shares are sold short, making it a relatively good candidate for a short squeeze going forward.
Booking Holdings (BKNG)
Another key post-pandemic trend is increased spending on travel, Goldman Sachs wrote in its December note. The travel companies that are able to effectively use marketing to promote their travel offerings will probably gain the most market share, the firm predicted.
That should leave Booking Holdings (NASDAQ:BKNG), which owns many of the most popular online travel agencies, very well-positioned going forward. That’s because many travel companies will probably spend a great deal of money on their websites to exploit the travel boom.
And as I noted in a December column, “in the third quarter, the number of hotel rooms rented through [BKNG] climbed about 8% versus Q3 of 2019, while the value of its gross bookings soared 27% versus the same period in 2019.” Moreover, George Soros, the highly successful billionaire investor, purchased 10,000 shares of the stock in Q3.
BKNG has a reasonable forward price-earnings ratio of 18.6 times.
General Motors (GM)
After U.S. gasoline prices fell tremendously in the last few months, I believe that General Motors (NYSE:GM) is benefiting from “revenge buying” of SUVs and pickup trucks in the country.
Moreover, the number of vehicles that it sold in the U.S. soared 41% year-over-year to 623,000 last year. Interestingly, last year GM sold more vehicles than any other automaker in the U.S. last year.
And as Seeking Alpha explained, the automaker “credited full-size pickups and full-size SUV segments for the strong performance as these categories made up over half of the total sales for the full year.
GM noted that it is now selling nine EV models, giving it the opportunity to expand its market share in the category.
Furthermore, GM sold a record 16,266 EVs in Q4, and its EV sales should greatly increase this year as it produces 70,000 of its popular Bolt EVs, launches additional EV models, such as the electric version of its Silverado pickup, and consumers become more familiar with its other, existing EV offerings, including the Hummer and the Cadillac Lyriq.
Shake Shack (SHAK)
A very popular U.S. gourmet hamburger chain, Shake Shack (NYSE:SHAK), reported its preliminary fourth quarter and full-year results on Jan. 10.
The company stated that its sales had jumped to $238.5 million. Moreover, its same-store sales climbed 5.1% last quarter and 7.8% in the full year.
Meanwhile, SHAK believes that its restaurant-level operating margin came in at a very strong 19% last quarter.
Speaking on CNBC yesterday, the channel’s contributor, Josh Brown, who’s also an investment manager, stated that SHAK’s strong Q4 results show that it’s pleasing its customers. And I agree with that assessment.
Additionally, I believe that the company is benefiting from a post-pandemic boom in restaurant spending and much stronger middle-class and upper-class consumer spending than Wall Street expects.
Finally, every time I’ve gone to Shake Shack restaurants, they have been very crowded.
SHAK stock has a rather low trailing price-sales ratio of 2.1 times.
On the date of publication, Larry Ramer held long positions in MGM and EVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.