The expanded child tax credit coming into effect in the coming days will have a big impact on the stock market, CNBC’s Jim Cramer said Tuesday.
As families across the country prepare their children for return to school this fall, grocery stores, wholesalers and other businesses are expected to reap the benefits.
Above all, four listed companies should achieve a boost in sales through the increase in payments to many households, said Cramer. Those stocks are Levi Strauss, American Eagle Outfitters, Dick’s Sporting Goods, and the owner of the Simon Property mall.
“Probably the most important part of the stimulus package actually only takes effect this week,” he said at “Mad Money”. “Parents across America will receive a number of child tax credits over the next six months, and I think a decent chunk of that money goes into our favorite retail items.”
Below are the key takeaways about each name:
Levi Strauss: “This is a company that has emerged stronger from the pandemic. While it just reported a great quarter, the stock has barely moved, Cramer said, adding that stocks “are only selling 19 times next year’s earnings estimates.” Before the stimulus, I think you should buy it right here before those checks land in bank accounts. “
American Eagle Outfitters: “I think the stock has a lot more headroom. I think it’s just stabilizing and preparing for the next step, which is why we recently bought it for the charity,” said Cramer. “While American Eagles has made a monster move, I think the stock remains cheap given its tremendous persistence. [Trading at] 16 times next year’s earnings estimates is a bargain. “
Dick’s: “Dick’s had the best quarter of any retailer we tracked towards the end of May,” and “Management nearly doubled its earnings guidance for the full year,” said Cramer. “While this stock has done tremendously, I don’t think it reflects the strength of those numbers, especially since Dick’s only sells for 12 times earnings.”
Simon Property Group: “I think people are going to take their tax credit [dollars] and spend it at the mall, which probably belongs to Simon, “Cramer said.” It doesn’t hurt that they raised the dividend last year [to a] juicy 4.4% yield. “
Disclosure: Cramer’s charitable trust owns shares in American Eagle Outfitters.
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