Canadian stock investors seek growth in U.S. consumer comeback

Thu Nov 29, 2012 12:01pm EST
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By Andrea Hopkins

TORONTO (Reuters) - While fear of the U.S. fiscal cliff promises to hold financial markets hostage at least to year-end, a surge in Black Friday shopping and a recovery in the U.S. housing market has Canadian investors looking to a few consumer-fed stocks for potential growth.

The retreat of the U.S. consumer during the Great Recession left shares of retailers, luxury goods producers, auto and appliance makers, home builders and others reeling on both sides of the border. But signs of improving confidence among shoppers could encourage a play on consumer spending, and Canadian strategists see an array of opportunities.

The No. 1 reason the U.S. consumer recovery has lagged the end of the recession is residential real estate, says Noah Blackstein, portfolio manager at Scotiabank's Dynamic Funds.

With housing starts and sales hitting bottom and beginning to pick up in the United States, and at still-high levels in Canada, the tide has begun to turn.

"Real estate really matters to a lot of consumers. As residential real estate recovers, Americans are more confident in the value of their assets. And they're also seeing the labor numbers improving as the housing market has a whole multiplier effect," said Blackstein.

Black Friday sales provided a strong start to the holiday shopping season in Canada and the United States, though whether the surge will last is unclear. In New York, the National Retail Federation said sales for the four days from U.S. Thanksgiving to Sunday rose 12.8 percent from last year.

Gavin Graham, president at Graham Investment Strategy in Toronto, pointed to a few stock picks on both sides of the border that can tap into a U.S. housing recovery and its knock-on effect on furnishings, appliances and household.

While big-box home stores like Home Depot (HD.N: Quote) and Lowe's (LOW.N: Quote) may seem obvious picks, he warns they have already regained strength, most recently in response to Hurricane Sandy. But niches remain.   Continued...