The consumer staples sector has been drawing investors’ attention of late backed by an improving economy and rising consumer confidence. Improved labor market optimism and gradual wage acceleration are driving consumer confidence, a key determinant of the economy’s health.

Consumer Confidence Surges

Consumer confidence improved moderately during the month of June indicating that the economy is on the recovery path after a dismal show in May. Steady job additions and persistently low unemployment have helped the household wealth to increase. This, in turn, boosted consumer spending.

According to the recent Conference Board data, the Consumer Confidence Index rose to 118.9 in June from May’s reading of 117.6. We expect this positive sentiment to translate into higher consumer spending that may help revive sales.

In mid-June, the Federal Reserve increased its benchmark interest rate a quarter point for the third time since December, reiterating the fact that the economy is in good shape. The widely anticipated move, in view of strengthening labor market and stabilizing inflation, takes the Fed rate from 0.75–1% to 1–1.25%. Further, the Fed indicated that it anticipates the next hike in December, along with three more in the coming year, which signals rising consumer confidence as well as the U.S. economy’s growth.

Sector’s Correlation with the Economy

Although the Consumer Staple sector, which is at the bottom 44% of the Zacks Sector Rank (9 out of 16), has not been an outstanding performer, it still holds some promise, given the favorable economic indicators. We note that so far in the year, the sector has registered an increase of 8.32%, almost in-line with the S&P 500 that is up 8.34%.

The rebound in oil prices from all-time lows, improving employment scenario and a gradual improvement in the housing market signal that the economy is on a recovery mode.

3 Stocks to Benefit as Consumers Regain Confidence

Since the aforementioned sector is positioned to benefit from this stellar reading on confidence level, picking stocks from such a sector will be a smart move. In fact, investing in the consumer staples stocks is safe because of their defensive nature. Surging consumer confidence is another indicator that the economy is poised to grow in the second half of the year.

This is why it may be a good idea to pick stocks from consumer staple sector at this point. However, picking winning stocks is not an easy task.

With the help of our new style score system, we have shortlisted three stocks that have excellent prospects and hold immense growth potential. Our Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with a Growth Style Score of ‘A’ or ‘B’, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best investment opportunities in the growth investing space and certainly have bright prospects to ride out the impending volatility.

3 Prominent Picks

Aramark (ARMK - Free Report)

Headquartered in Philadelphia, PA, Aramark carries a Zacks Rank #2 along with a Growth Score ‘A’. The company offers food services, facilities management, uniform and career apparel to health care institutions, universities, school districts, stadiums, and businesses.

Aramark has been delivering strong, broad-based productivity improvements in North America and International base accounts. It has also been reinvesting in technology and capabilities. The provider of food, facilities, and uniform services has delivered positive earnings surprises in six out of the seven consecutive quarters, along with in-line results in the remaining one. It has also posted positive sales surprise in four of the seven consecutive quarters.

The Zacks Consensus Estimate for Aramark has increased 2.3% for fiscal 2017 and improved 2.0% for fiscal 2018 over the last 60 days. Further, the stock has a long-term earnings growth rate of 12.00% and beta of 0.50.

Aramark’s shares have moved up 17.2% in the last six months significantly outpacing the Zacks categorized Food-Miscellaneous industry’s 4.7% decline.

Church & Dwight Company, Inc. (CHD - Free Report)

Ewing, NJ-based Church & Dwight is the world's leading producer of baking soda and has posted positive earnings surprise in 10 out of the 13 consecutive quarters. It has also delivered positive sales surprise in 11 of the past 13 quarters. Estimates have also increased for 2017 and 2018 since the last 60 days. Further, it is expected to witness earnings growth of 8.87% in 2017 and 7.82% in 2018.

Shares of Church & Dwight have rallied 16.1% compared with the Zacks categorized Soap & Cleaning Preparations industry’s gain of 13.3%, in the past six months.

With a Growth Score of B, beta of 0.57, long-term earnings growth rate of 9.17% and an attractive Zacks Rank #2, this stock is a hot pick for investors.

Colgate-Palmolive Company (CL - Free Report)

This New York City-based global consumer products manufacturer and distributor carries a Zacks Rank #2 and a Growth Score of ‘A’. Solid growth in the stock price, impressive earnings trend, inspiring strategic initiatives and robust market share has remained the strengths of the company. Further, the company’s beta of 0.82 and a long-term EPS growth rate of 9.22%, justify its growth potential.

Further, the company is expected to witness earnings growth of 3.79% in 2017 and 8.22% in 2018. The company has delivered an average positive surprise of 0.74% in the last four straight quarters.

Shares of Colgate-Palmolive have moved up 11.9% compared with the Zacks categorized Consumer Staples’ gain of 8.5% in the past six months.

Bottom Line

Intelligently selecting stocks for investments greatly benefits investors. The above-mentioned stocks can prove to be valuable additions to your portfolio.

You can also use the Zacks Stock Screener to find other stocks with this winning combination. Your search ends at stocks with a favorable Zacks Rank of either #1 or #2, which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions. As we know, a sturdy portfolio always gives favorable returns.