Levi’s and American Eagle among stocks to benefit from enhanced child tax credit
The enhanced child tax credit that will take effect in the coming days will have big implications for the stock market, CNBC’s Jim Cramer said Tuesday.
As families across the country get their kids ready to go back to school this fall, grocery stores, big box retailers and other businesses should reap the rewards.
Four publicly traded companies in particular are expected to see increased sales from increased payments to many households, Cramer said. These stocks are Levi Strauss, American Eagle Outfitters, Dick’s Sporting Goods and mall owner Simon Property.
“You can say that the most important part of the stimulus package does not actually start until this week,” he said on “Mad Money”. “For the next six months, parents across America will receive a series of Child Tax Credit checks, and I have to believe that a good chunk of that money is going to our favorite retail games.”
Below are the main takeaways from each name:
Levi Strauss: “This is a company that has emerged from the pandemic stronger than ever. Even though it just posted a great quarter, the stock has barely moved, Cramer said, adding that the shares “only sell 19 times next year’s earnings estimates.” Before the stimulus, I think you should buy it here, now before those checks start hitting the bank accounts. “
American Eagle Outfitters: “I think the stock has a lot more wiggle room. I think it’s leveling off and getting ready for its next move here, which is why we recently bought it for the charitable trust, ”Cramer said. “Even though American Eagle has had a monster move, the stock remains cheap, given, I think, its huge record for consistency. [Trading at] 16 times next year’s earnings estimate is a steal. “
Dick’s: “Dick’s reported the best quarter of any retailer we track towards the end of May,” and “management nearly doubled their full-year profit guidance,” Cramer said. “While this action has worked tremendously, I don’t think it reflects the strength of those numbers, especially since Dick’s is selling for only 12 times the profit.”
Simon Property Group: “I think people will take advantage of their tax credit [dollars] and spend them at the mall, which probably belongs to Simon, ”Cramer said. “It doesn’t hurt that they increased the dividend last year. [to a] juicy yield of 4.4%. “
Disclosure: Cramer’s Charitable Trust owns shares of American Eagle Outfitters.