The enhanced child tax credit going into effect in the coming days will have big implications for the stock market, CNBC’s Jim Cramer said Tuesday.
As families across the country prepare their children to return to school this fall, grocery stores, big-box retailers and other businesses are expected to reap the benefits.
Four publicly traded companies in particular stand to get a bump in sales from the payout boost to many households, Cramer said. Those stocks are Levi Strauss, American Eagle Outfitters, Dick’s Sporting Goods and mall-owner Simon Property.
“Arguably the most important part of the stimulus package actually only kicks in this week,” he said on “Mad Money.” “For the next six months, parents all over America will get a series of child tax credit checks, and I have to believe a decent chunk of that money flows to our favorite retail plays.”
Below are key takeaways on each name:
Levi Strauss: “This is a company that emerged from the pandemic stronger than ever. Even though they just reported a magnificent quarter, the stock barely budged, Cramer said, adding that shares are “selling for just 19 times next year’s earnings estimates. Ahead of the stimulus, I think you should buy it right here, right now before those checks start hitting bank accounts.”
American Eagle Outfitters: “I think the stock has a lot more room to run. I think it is just plateauing and getting ready for it’s next move here, which is why we recently bought it for the charitable trust,” Cramer said. “Even though American Eagle’s had a monster move, the stock remains cheap, given I think its tremendous record of consistency. [Trading at] 16-times next year’s earnings estimates, it’s a steal.”
Dick’s: “Dick’s reported the best quarter of any retailer we follow near the end of May” and “management nearly doubled their full-year earnings forecast,” Cramer said. “While this stock has run tremendously, I don’t think it reflects the strength of these numbers, especially since Dick’s sells for just 12-times earnings.”
Simon Property Group: “I think people will take their tax credit [dollars] and spend them at the mall, which probably belongs to Simon,” Cramer said. “Doesn’t hurt that they boosted the dividend last year [to a] juicy 4.4% yield.”
Disclosure: Cramer’s charitable trust owns shares of American Eagle Outfitters.