Rebirth of the Roaring 20s: 3 Stocks Ready to Ride the Economic Boom
Several positive signs point to potential prosperity as I look at the current financial landscape. The stock market is surging to new highs, with the S&P 500 reaching record territory and the Nasdaq index not far behind. Speculative investments like Bitcoin (BTC-USD) have also been rallying. This shows investors are feeling optimistic about the future.
More importantly, key economic indicators seem strong. The labor market remains robust, with unemployment hovering around historic lows. GDP grew a solid 3.3% in Q4. Inflation has also moderated after spiking earlier this year. Thus, with inflation cooling, the Federal Reserve will likely cut rates by mid-year, further boosting the economy.
With productivity-enhancing technologies like AI continuing to transform business, perhaps we are transitioning into stronger, more sustained economic growth akin to the “Roaring 20s” period a century ago. Of course, things can always take a turn for the worse. But for now, the momentum seems to be tilted to the upside.
If we are indeed entering an economic boom, certain stocks should outperform. In particular, stocks levered to strong consumer spending, technological innovation, and market speculation are poised to benefit tremendously if the good times keep rolling. Here are three to look into if that’s your take.
Tesla (TSLA)
As I analyze the current economic landscape, Tesla (NASDAQ:TSLA) stands out to me as a stock that could get a significant “Roaring 20s” boost if my thesis of an impending economic boom plays out. The electric vehicle maker has attributes that make it poised to prosper tremendously in a bull market environment.
With Tesla stock down 26% from its December high, now presents an opportune time for bulls to take a position. Concerns over lower deliveries have weighed on the stock, but I believe the negativity is overdone. Tesla has a history of ramping up production rapidly to meet strong demand for its vehicles. As economic momentum builds, consumers tend to spend more freely – including on big-ticket items like cars.
Notably, I believe buying TSLA stock below $200 is worthwhile, given its historical performance. And with electric vehicles still only comprising 1% of cars on the road, Tesla retains substantial room for growth in the years ahead as EV adoption rises. When consumer and business confidence improves in future economic cycles, customers become more willing to purchase premium products like Teslas.
Rising interest rates have also dampened EV demand recently. However, the Federal Reserve could start cutting rates as soon as mid-year if inflation continues easing back toward their 2% target. This would provide a spark for the economy, lowering the cost of financing for aspirational Tesla buyers.
In short, expectations for Tesla seem muted, headed into a potentially prosperous economic period. This mis-pricing sets the stage for Tesla to smash estimates and reward shareholders in an economic boom.
Caesars Entertainment (CZR)
Caesars Entertainment (NASDAQ:CZR) stands out as another stock perfectly-positioned to capitalize in a modern-day Roaring Twenties environment. The hotel and casino operator owns iconic brands well-known for luxury, glitz, and entertainment – key attributes sought by consumers who feel flush during good economic times.
As consumers built up savings throughout the pandemic, demand for leisure travel and experience spending exploded in the early post-pandemic era. However, high inflation and rising interest rates have since caused consumers to moderate their discretionary purchases. This pullback has driven CZR stock down more than 63% from its 2021 peak.
With expectations lowered, CZR stock now looks attractive for investors looking to bet on the accelerating economic rebound. If inflation settles back down and the Fed cuts rates to boost growth, cash-flush consumers will likely unleash massive pent-up demand for getaways to Caesars’ Las Vegas and regional casino resorts.
Analysts already forecast Ceasars’ earnings per share quadrupling from 2023 to 2031, driven by mid-single-digit annual revenue growth. However, if the macroeconomic backdrop turns more stimulative for the consumer, Caesars could smash projections and reward shareholders with outsized returns.
LVMH (LVMUY)
Lastly, French luxury goods conglomerate LVMH (OTCMKTS:LVMUY) also stands out as a stock that will ride higher during an economic surge. Regardless of economic cycles (expansions or slowdowns), the most prestigious brands tend to demonstrate resilience. Indeed, LVMH owns some of the most unrivaled status symbols spanning fashion, wines and spirits, perfumes, watches, and jewelry.
Even when times get tough, wealthy consumers still splurge on luxury items to retain social status. Plus, periods of strong economic growth and bull markets disproportionately benefit the wealthiest households. As their investable assets balloon, high-net-worth individuals sustain demand for LVMH’s range of luxury products.
The company continues to fire on all cylinders, with revenue up 15% and net income rising 30% over the past quarter. LVMH also sports a hearty 20% net profit margin, providing nice insulation if economic conditions weaken. And with a dividend yield nearing 1.6%, investors get paid to wait as the luxury leader keeps innovating on its iconic brand portfolio, generating long-term growth.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
