Unemployment is at its lowest levels since 2008. Consumer confidence is also at multi-year highs.
It’s only a matter of time before consumers start to loosen up their purse strings. But I’m not talking about buying a new TV or enjoying a nice dinner out. Think bigger.
U.S. consumers have delayed buying a new car, replacing their washing machine, getting that new RV or adding a new recliner to their living room. They’ve done this for nearly a decade now.
What’s more is that the modern day American is choosing to rent, rather than purchase a home. This appears to be a generational shift.
Couple that with the fact that many couples are delaying marriage (read: no need to buy an engagement ring), and there’s even more money to spend on big ticket items.
Here are the top 4 big ticket stocks to own:
No. 1 Big Ticket Stock: General Motors (NYSE: GM)
The first thing many consumers will do is look to upgrade their vehicles. The average age of vehicles on the road is over 11 years old. General Motors not only has a leading position in the U.S. market, but it’s also one of the best investments in the entire market.
Investors continue to look beyond the near-term headwinds and headlines related to the various vehicle recalls. Vehicle sales in the U.S. continue to recover nicely, currently right at the highest since 2006.
GM owns the U.S. market when it comes to market share. But with 19% of the U.S. market, GM is turning to emerging markets, most notably is its China focus, where it’s building four new plants to boost exports from China. Another big initiative in China includes boosting its luxury car offerings in country to take advantage of the rising middle class there.
GM offers the highest dividend yield of our 4 big ticket stocks, yielding 3.2%. It also happens to trade at the lowest P/E ratio based on next year’s earnings estimates, coming in at 8.1. The automaker is a growth at a reasonable price opportunity, where its P/E to growth rate (PEG) ratio is 0.87.
No. 2 Big Ticket Stock: Whirlpool Corporation (NYSE: WHR)
Home appliance shipments were up 11% year over year for the month of June and one of the biggest benefactors of consumers purchasing new washers, dryers and dishwashers is Whirlpool.
Whirlpool is heavily dependent on North America for its revenues, which means it should be able to capitalize on the interim big ticket spending in the U.S. But longer-term, Whirlpool plans to expand into faster growing markets. Most notably, its regions of focs include Asia and Latin America.
Whirlpool offers a 2.1% dividend yield. Shares are trading at a P/E of 16, and coupled with analysts’ earnings expectations over the next five years, it trades at the lowest PEG ratio. Whirlpool’s PEG comes in at a low 0.76.
No. 3 Big Ticket Stock: Thor Industries (NYSE: THO)
Thor Industries is the world’s largest manufacturer of recreational vehicles. It’s generated an annual profit every year for 30 plus years. At the end of April, its backlog was $820 million, which was up 26% from the prior year. Then in June, Thor posted fiscal 3Q earnings of $1.03 a share, growing 12% year over year.
Thor is trading at a P/E of 12.8 based on next year’s earnings estimates. Its cheap valuation, coupled with Wall Street’s strong earnings growth expectations, puts its P/E to growth rate (PEG) ratio at 0.85. The RV company also has no debt and pays a 1.7% dividend yield.
No. 4 Big Ticket Stock: La-Z-Boy (NYSE: LZB)
In the off chance the housing market does continue to rebound, La-Z-Boy will continue to excel as homebuyers fill their houses with furniture. However, it should also continue benefiting from consumers moving up in the rental market, not to mention the much-needed replacement of older furniture.
La-Z-Boy is also looking to gain market share by boosting its retail presence. It already has 315 stores, but also has a 4-4-5 strategy. This includes growing its store base to 400 stores that are averaging $4 million in sales per store, over the next five years.
Shares of La-Z-Boy are down 28.5% year to date after releasing a weak fiscal 4Q earnings report in June. The stock now trades at a P/E of just 13 based on next year’s earnings estimates. Analysts still expect the company to grow earnings by 28% this year. The company carries no debt and offers a 1.1% dividend yield.
With the expected rise in discretionary income, consumers will be making big ticket purchases. The 4 big ticket stocks above should be some of the biggest benefactors of a strengthening economy and fatter consumer wallets.
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