The U.S. labor market is improving, with the unemployment rate at 5.1%, its lowest point since April 2008. Consumer confidence is on the upswing; indeed, consumers' views of current conditions were "considerably more favorable" in August than July, reports the Conference Board. Real (inflation-adjusted) wages increased a fairly strong 2.2% from July 2014 to July 2015, reports the Labor Department.
All of these economic indicators would seem to point to a strengthening market for one of the mainstays of the consumer market, namely clothing. Clothing makers should benefit as consumers have more money in their pockets, and I can recommend two particularly promising industry mainstays. These two are not just doing well, but my guru strategies, which are computerized strategies I created based on the writings of some of Wall Street's greatest thinkers, also are fans of these firms.
Michael Kors (KORS) is a renowned designer of luxury accessories and ready-to-wear, and his namesake company, established in 1981, currently produces a range of products, including clothing, accessories, footwear and eyewear, under the Michael Kors label.
One of my guru strategies is based on the writings of Joel Greenblatt, and it is this strategy that thinks Kors is a smartly dressed investment opportunity. Only two variables are used by this strategy -- earnings yield and return on total capital. The strategy ranks each of these and then calculates a final ranking from among the thousands of stocks in our database. Kors is a top 10 prospect, rankingNo. 6 among all publicly traded stocks on the New York and Nasdaq exchanges.
Also on the best-dressed list is Oxford Industries (OXM); its labels include Tommy Bahama and Lilly Pulitzer. My Peter Lynch-based strategy is recommending this clothing maker. It focuses on the P/E/G ratio, which is price-to-earnings relative to growth, and is a measure of how much the investor is paying for growth. A P/E/G of up to 1.0 is acceptable and below 0.50 is exceptional. Oxford is in exceptional territory with a P/E/G of 0.47. Also in its favor is a relatively small amount of debt.
Demand for clothing depends, in part, on the state of the economy. With the economy in a modest upswing and these two companies doing well with nicely priced stocks, now is a good time to enhance your investment portfolio with these stocks.