With challenging economic circumstances forcing many households to adapt, shrewd investors just might benefit from stocks for paycheck-to-paycheck living. To be sure, the most recent data on inflation suggests that consumers should be feeling some relief. Nevertheless, a new LendingClub report notes that 61% of U.S. adults still live hand-to-mouth with their employers.
Of course, lower-income workers struggle the most with gaining traction for the future. Still, acquiring stocks to benefit from financial strain may “enjoy” wide relevance. The same study shows that among those earning $100,000 or more, 45% reported living paycheck to paycheck. Thus, investing in economic trends – even negative ones – could pay off.
To be sure, investors must adopt an emotionally agnostic approach here. Frankly, you shouldn’t really gloat about potential stocks for market shifts. Nevertheless, you got to trade what the fundamentals give you.
On that note, below are the top stocks for economic change.
Five Below (FIVE)
A chain of specialty discount stores, Five Below (NASDAQ:FIVE) makes an excellent case for stocks for paycheck-to-paycheck living. Naturally, as a retailer specializing in bargain products, the business should appeal to those who have limited funds. At the same time, because of the company’s broad pricing – from products less than $5 to a select group of items under $25 – Five Below offers a bargain-hunting experience for everyone.
To be fair, one of the drawbacks of FIVE is that it may be one of the more hotly priced ideas for stocks to benefit from financial strain. For example, in the trailing one-year period, FIVE gained nearly 39% of equity value. And the market prices shares at 35.59X forward earnings, above 85.37% of its peers.
At the same time, the company benefits from consistent profitability, year in and year out. Also, it prints a three-year revenue growth rate of 18.8%, above 80.36% of the competition. Lastly, analysts peg FIVE as a consensus strong buy with a $218.27 price target, implying almost 12% growth. Therefore, it’s an overall solid idea for investing in economic trends.
Financial services giant Mastercard (NYSE:MA) naturally sells itself as one of the stocks for paycheck-to-paycheck living. As a recent Newsweek article pointed out, Americans owe nearly $1 trillion in credit card debt. Sadly, this metric doesn’t just exist to shame certain folks for profligate spending, though I’m sure several cases exist. Rather, inflation has gotten so hot that folks have little choice but to pull out the plastic.
To be completely upfront, MA may be one of the intriguing potential stocks for market shifts. However, it’s an icky thesis to profit off struggling households, thus requiring an emotionally agnostic approach. Also, betting on a credit card giant carries financial risks. Obviously, if cardholders default, that’s not great for the debt service provider. Also, MA does run hot with forward earnings multiple of 32.72.
Still, just like Five Below, Mastercard benefits from a consistently profitable business. In addition, the company’s three-year revenue growth rate clocks in at 11.5%, above 67.61% of sector rivals. In closing, analysts peg (among 18 experts) MA as a unanimous strong buy with a $460.59 price target, implying 16% growth. Therefore, it’s one of the top stocks for economic change.
A pawn shop operator, EZCorp (NASDAQ:EZPW) provides services across the U.S. and Latin America. Although pawn shops tend to have reputations in the extremes – from shady businesses to glamorized television programs – at the end of the day, they offer credit to unbanked communities. As a result, EZCorp easily ranks as a legitimate idea for stocks for paycheck-to-paycheck living.
Naturally, pawn shops are best known for the buying and selling component of their business model. Moving forward, if economic conditions become more challenging, you might expect EZCorp’s business to rise. Basically, people will be looking to unload some of their belongings for loans or straight-up cash.
Compared to the other stocks to benefit from financial strain, EZCorp suffered growth declines during the Covid-19 crisis. It also took a bit longer to find its footing. Still, now that circumstances are cynically moving in the “right” direction for EZPW, it could be a compelling idea for investing in economic trends. Certainly, Canaccord Genuity’s Brian McNamara thinks so, pegging shares a buy with a $15 price target. This forecast implies over 61% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.