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Consumer Discretionary

Food for Thought

By Peter Staas, on Feb. 6, 2015

A strengthening US economy, coupled with plummeting crude-oil and gasoline prices, has reinvigorated investors’ interest in the consumer-discretionary sector, based on the logic that lower prices at the pump free up more cash for households to spend on goods and services.

In Consumption Junction, we added two stocks to the Wealth Builders Portfolio: grocer Kroger (NYSE: KR), which has gained 22 percent since Nov. 21, 2014, and hotel chain Marriott International (NYSE: MAR), which has treaded water thus far. Both stand to benefit from lower gasoline prices.

However, lower fuel prices aren’t the be all and end all of these companies’ growth stories.

Kroger, for example, continues to ramp up its line of store-branded natural and organic foods and plans to expand Harris Teeter’s popular e-commerce platform, where customers fill up their virtual cart and check out online and then pick up their order at the store. Buy Kroger when the stock dips to less than $70 per share.

Marriott International, on the other hand, will benefit from an anticipated uptick in leisure travel this summer and an industry-wide room supply that has failed to keep up with demand growth. Marriott International rates a buy up to $80 per share; if the stock dips to about $70, consider checking in for an extended stay.

Quick and Easy

The restaurant industry likewise stands to benefit from the strengthening US economy and lower fuel prices, twin tailwinds that should accelerate a post-recession rebound in demand.

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