If you are the type of person who tends to buy the same brand of shoe year after year because you believe in the product, then you may be interested in investing in consumer stocks. To find opportunities in this category, we focused on stocks that have strong liquidity. Liquidity is important because it allows a company the flexibility to open expand markets, develop products, and stay the course during economic downturns. All of the consumer stocks listed today also have received a 'Buy' rating from industry analysts. We think you will find our list rather intriguing.
The current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a quick ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the current ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for consumer stocks. Then, we screened for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). From here, we looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We did not screen out any market caps.
Do you think these stocks will perform well? Use our list along with your own analysis.
1) LeapFrog Enterprises Inc. (LF)
|Industry:||Toys & Games|
LeapFrog Enterprises Inc. has an analysts' rating of 2.30, a current ratio of 3.77, and a quick ratio of 2.94. The short interest was 5.04% as of August 16, 2012. LeapFrog Enterprises Inc. designs, develops, and markets technology-based learning products and related proprietary content for children worldwide. The company offers multimedia learning platform products, including LeapPad, a kid-tough personalized learning tablet with a built-in camera and video recorder; and Leapster Explorer, a handheld multimedia learning platform. Its multimedia learning platform products also comprise Leapster2, a handheld learning platform with a multi-directional control pad, touch-screen, and built-in stylus; Tag reading system, a stylus-based reading system; and Tag Junior reading system designed to introduce younger children to books and reading.
2) JAKKS Pacific, Inc. (JAKK)
|Industry:||Toys & Games|
JAKKS Pacific, Inc. has an analysts' rating of 2.30, a current ratio of 3.48, and a quick ratio of 3.05. The short interest was 16.21% as of August 16, 2012. JAKKS Pacific, Inc. designs, produces, and sells toys and consumer products in the United States and internationally. It provides traditional toys and electronics products comprising action figures and accessories primarily based on Ultimate Fighting Champion, Total Non-Stop Action wrestling, and Pokmon franchises; Road Champs, Fly Wheels, and MXS toy vehicles and accessories; and electronics products under the SpyNet, EyeClops Bionic Eye, Laser Challenge, and Plug It In & Play TV Games based on Disney and other brands.
The company also offers dolls and accessories, such as small, large, fashion, and baby dolls based on Disney Princesses, Disney Fairies, Cabbage Patch Kids, Hello Kitty, Graco, and Fisher Price brands; private label products; pet products, which comprise toys, consumables, and accessories under the JAKKS Pets and Kong brands; and assorted pet products under the American Classics brand.
3) Nike Inc. (NKE)
|Industry:||Textile - Apparel Footwear & Accessories|
Nike Inc. has an analysts' rating of 2.40, a current ratio of 2.98, and a quick ratio of 2.12. The short interest was 1.49% as of August 16, 2012. NIKE, Inc., together with its subsidiaries, engages in the design, development, marketing, and sale of footwear, apparel, equipment, and accessories for men, women, and children worldwide. The company offers products in seven categories, including running, basketball, football, men's training, women's training, NIKE sportswear, and action sports. It also markets products designed for kids, as well as for other athletic and recreational uses, such as baseball, cricket, golf, lacrosse, outdoor activities, football, tennis, volleyball, walking, and wrestling.
4) Perry Ellis International Inc. (PERY)
|Industry:||Textile - Apparel Clothing|
Perry Ellis International Inc. has an analysts' rating of 2.40, a current ratio of 3.96, and a quick ratio of 2.31. The short interest was 9.29% as of August 16, 2012. Perry Ellis International, Inc. engages in designing, sourcing, marketing, and licensing apparel products in the United States and internationally. It offers men's wear, including career and casual sportswear, bottoms, dress shirts and pants, jeans wear, golf apparel, sweaters, sports apparel, swimwear and accessories, active wear, outerwear, and leather accessories; and women's wear comprising dresses, sportswear, swimwear, and swim accessories. The company offers its products under various brands, including Perry Ellis, Axis, Tricots St.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.