Houghton and Atkeson

3 Best Sectors for an Economic Recovery

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Recovery Beneficiary #1: Consumer Discretionary

Consumer discretionary stocks are by far the strongest measured by relative strength.

All of the top five strongest sectors in the S&P 500 (SPX) are consumer discretionary sub-industry groups.

In order, they are:

1. Tires and Rubber
2. Auto Dealers
3. Restaurants
4. Casual Dining -- micro cap
5. Men's Apparel Retailers
6. Book Stores -- this does not include Amazon.com (AMZN)

What the price of stocks rolled up into industry groups is saying is that the hardest hit consumer areas will be some of the first areas to recover, and have the potential to rebound with higher absolute and percentage gains than other sectors.

Automobiles (dealers and parts) may show a tremendous bounce as the existing dealer base is reduced, GM, Chrysler and Ford (F) focus on selling fewer but better cars, and Congress potentially enacts short-term stimulus legislation directed specifically at the car industry (e.g., a cash-for-clunkers law much like what has already been enacted in many European countries).

After running these strong consumer discretionary groups through both technical and fundamental screens, the stocks that stood out as most attractive now are:

• Group 1 Automotive Inc. (GPI)
• Asbury Automotive Group (ABG)
• Carrols Restaurant Group (TAST)
• Books-A-Million Inc. (BAMM)