6 More Stocks to Play the Shift in Consumer Spending

Susan Dziubinski: Hi, I'm Susan Dziubinski with Morningstar. During the pandemic, consumers shifted their spending away from services and toward goods. Today, however, consumer spending has begun to return to prepandemic patterns as consumers have started to return in office and to other in-person activities. Here today to discuss some new research on the spending shift and some industries, in particular stocks that stand to benefit is Dave Sekera. Dave is Morningstar's chief U.S. market strategist.

So, Dave, let's start out by talking about how those spending patterns shifted during the pandemic, and we started seeing less money being spent on services and more being spent on goods. But the pendulum has started to swing back. So, tell us what you've seen.

Dave Sekera: It definitely has, and we are starting to see consumer behavior start to normalize and see that spending shift away from goods and into services. And in fact, in order to get back to what we would consider to be prepandemic trends, we'd expect to see a shift of at least $450 billion out of those goods categories and back into services.

6 Stocks to Play the Shift in Consumer Spending

These stocks are considered undervalued. Data as of Aug. 23, 2022.

1. Lyft LYFT
2. Uber UBER
3. Starbucks SBUX
4. Sabre SABR
5. Anheuser-Busch InBev BUD
6. Boston Beer SAM

Dziubinski: Today, let's talk about a few ideas that might stand to benefit as we return to our offices and to these public events. So, let's start with ride-hailing stocks. Have the number of riders bounced back using ride-hailing services? And how do the stocks look today?

Sekera: Well, as you know, people are much more comfortable going back out into public. We are seeing public events coming back pretty quickly--Lollapalooza this summer, other outdoor events as well. We are definitely seeing an increase in ridership in the ride-hailing services. But not only that, but I also think we're also starting to see an increase in number of rides per rider. So, I think, between those two, we are looking for good usage looking forward. The two stocks there, of course, are Lyft and Uber. Uber had reported the results relatively recently. The stock did pretty well after the results came out. Yet, that stock is still a 5-star-rated stock, trading about half, or maybe even slightly under half, what we think the intrinsic value of that company is worth.

Dziubinski: Now, what types of stocks could benefit, Dave, from a return to office or return to business travel? And do we have any favorites there?

Sekera: We are definitely starting to see more and more employees coming back to the office. Now, that has been kind of a slow gradual rise, but it's certainly been up and to the right. So, as people are coming back to the office, if they are anything like me, they're going to need coffee. And so, one stock, which did get caught up in the downdraft earlier this year was Starbucks, and we think that there's good tailwinds there. That would be one I'd advise investors to take a look at. In the travel sector, as business travel is coming back, I'd take a look at the travel technology space. Now, that space specifically is a little bit of an oligopoly. There are really three main players in that market. It's Booking, it's Expedia, and it's Sabre. Of those three, I think Sabre, talking to our analyst team, is one that's actually probably best leveraged to the return of that business traveler.

Dziubinski: And then, lastly, what about a return to public events like concerts and sporting events? What types of companies stand to benefit from that?

Sekera: Well, one thing that we noticed that was interesting is that as consumers were changing their behavior and their habits, things like alcoholic consumption changed from being on premise to at home. And one thing that occurs there is that people are less brand-conscious when they're buying alcohol to consume at home. And of course, those lower-tier brands also have lower margins. So, as people are going back out more, and they're consuming in public, we expect that behavior to normalize and to go back to being more brand-conscious when they're in public and buying those higher-tier brands, which of course have higher margins. So, there are several different alcoholic beverage companies that we think are undervalued today. Two that I would highlight there would be Anheuser-Busch InBev, and then the other one would be Boston Beer.

Dziubinski: Dave, thank you so much for your ideas today. We appreciate it.

Sekera: Oh, thank you, Susan.

Dziubinski: I'm Susan Dziubinski with Morningstar. Thanks for tuning in.

Watch 4 Stocks to Play the Shift in Consumer Spending from Dave Sekera.