* U.S. housing recovery seen spurring consumer spending
* Staples like autos, appliances to benefit alongside
* Too hard to call winners in the tech sector
By Andrea Hopkins
TORONTO, Nov 29 While fear of the U.S. fiscal
cliff promises to hold financial markets hostage at least to
year-end, a surge in Black Friday shopping and a recovery in the
U.S. housing market has Canadian investors looking to a few
consumer-fed stocks for potential growth.
The retreat of the U.S. consumer during the Great Recession
left shares of retailers, luxury goods producers, auto and
appliance makers, home builders and others reeling on both sides
of the border. But signs of improving confidence among shoppers
could encourage a play on consumer spending, and Canadian
strategists see an array of opportunities.
The No. 1 reason the U.S. consumer recovery has lagged the
end of the recession is residential real estate, says Noah
Blackstein, portfolio manager at Scotiabank's Dynamic Funds.
With housing starts and sales hitting bottom and beginning to
pick up in the United States, and at still-high levels in
Canada, the tide has begun to turn.
"Real estate really matters to a lot of consumers. As
residential real estate recovers, Americans are more confident
in the value of their assets. And they're also seeing the labor
numbers improving as the housing market has a whole multiplier
effect," said Blackstein.
Black Friday sales provided a strong start to the holiday
shopping season in Canada and the United States, though whether
the surge will last is unclear. In New York, the National Retail
Federation said sales for the four days from U.S. Thanksgiving
to Sunday rose 12.8 percent from last year.
Gavin Graham, president at Graham Investment Strategy in
Toronto, pointed to a few stock picks on both sides of the
border that can tap into a U.S. housing recovery and its
knock-on effect on furnishings, appliances and household.
While big-box home stores like Home Depot and Lowe's
may seem obvious picks, he warns they have already
regained strength, most recently in response to Hurricane Sandy.
But niches remain.
"What we used to call 'white goods' -- Whirlpool is
one name. Where they've had fairly bad numbers but if there is
indeed a pickup in demand for housing, then you are going to see
a pickup in demand for washing machines, dryers and the like,"
He also likes furniture makers such as Herman Miller Inc
, and mid-level retailers such as Macy's Inc in
the United States and Canadian Tire Corp in Canada.
Defensively, he would keep money in discount retailers like
Dollar Tree Inc and Dollarama Inc and in
consumer staples like Proctor & Gamble Co and Kraft Foods
Both Blackstein and Graham also like the automakers,
including General Motors Co and Ford Motor Co,
predicting a rebound in car sales after years of consumer
retrenchment left an aging fleet of vehicles.
"You'll see car companies benefiting -- some has already
been seen and more will come. New car purchases have been below
trend line for an extended period of time for automobiles, we've
had a long period of below-average auto sales, and that number
could snap back for sure," Blackstein said.
Paul Taylor, chief investment officer at BMO Harris Private
Banking, sees some good stock picks beyond the big names in
retailing and consumer goods.
"There are a few names within the discretionaries that may
have a little more torque to them," said Taylor, nodding to
Gildan Activewear Inc, hockey gear maker Bauer
Performance Sports, and movie system maker Imax Corp
, which stand to gain when families have a little extra
money in their budgets.
The Canadian strategists had a few areas to stay away from
as well, saying it is too tough to call winners in technology.
Electronic retailers are being hammered by competition, while
developers are already expensive.
"It's difficult to get excited about individual electronic
names, because that's a low-margin business that keeps getting
more and more brutal in terms of competition and the
distribution," Graham said.