10 Cars, Bikes and Bags Beating the Stock Market

(Adds that Coach beat earnings estimates on a 15% sales increase in its most recent fiscal quarter.)

BOSTON ( TheStreet) -- Shares of consumer-discretionary companies, which sell products such as cars, clothing and hotels, are on a roll this year, as investors are anticipating higher spending after a couple of years of household austerity.

Friday's strong jobs report coupled with continued signs of an improving U.S. economy have supported the view that consumers will begin to spend on products that make life easier or help them feel better about themselves. And families are just now starting to take on debt again.

Indicative of that, consumer-discretionary stocks are up 8.2% through Feb. 3 this year and 25% since a cyclical low Oct. 3, according to Standard & Poor's.

S&P's analysts recommend "overweighting" the sector, as its economists are forecasting U.S. GDP growth of 2% this year and a healthy 2.3% increase in consumer spending.

The benchmark S&P 500 has gained 7% this year, the best opening advance for the index since its 14% rise at the start of 1987, S&P reports.

And that news, in and of itself, gives consumers even more confidence that they can afford to spend, as they see their 401(k) retirement accounts and investment portfolio finally start to fatten after 2011's paltry returns.

The top-five performing consumer-discretionary stocks are all auto industry players, led by Tata Motors ( TTM), India's largest carmaker, up a whopping 52% this year. And 10 of the top 13 leaders are either car companies or industry suppliers.

The jump in automakers' shares is in anticipation of booming sales in emerging markets, as well as strong sales in the U.S., where the auto fleet is aged and decrepit.

The average age of a U.S. car is a record 11.1 years and that means consumers will have to start trading in their beater and buy something new, Standard & Poor's MarketScope Advisor said. So the auto market is seen as a can't-miss if the economy improves as the year goes on.

Also hot are luxury-goods purveyors, such as Coach ( COH). But in a surprise, the century-old, middle-class merchant, department store chain JCPenney ( JCP) is also having a great showing, gaining 17% this year.

Even baby boomers' favorite fantasy vehicle manufacturer, motorcycle maker Harley-Davidson ( HOG), is back in top gear, rising 19% this year.

Here is a sampling of 10 consumer-discretionary stocks from various industrieswith increases of 17% or more this year:

10. General Motors ( GM)

Company profile: GM, mockingly called "government motors" for its government bailout, emerged from bankruptcy in July 2009. It is the market leader in U.S. sales with a 19% market share of the market.

Investor takeaway: GM's shares are up 29% this year. Morningstar found five "buys" and one "sell" in its survey of analysts' ratings. S&P has a "strong buy" recommendation on its shares and gives the company five stars, its highest. It reiterated that opinion Feb. 1.

9. Galaxy Entertainment Group ( GXYEY)

Company profile: Galaxy is one of only six companies with a license to operate casinos in China, including in the lucrative Macau resort. It also sells construction materials in Hong Kong, Macau and mainland China.

Investor takeaway: This may be a stock for gamblers in more ways than one. Its shares are up 30% this year, including 27% in the past month, giving it a market value of $10 billion. But S&P has a "strong sell" rating on its stock, and few, if any, U.S. analysts have ratings on the company. But the potential, in the event of continued growth in the Chinese middle class, could make this a great long-term play.

8. LVMH Moet Hennessy Louis Vuitton ( lvmuy)

Company profile: LVMH is an international producer and seller of luxury goods, ranging from fashion and leather goods, to watches and jewelry, wines and spirits, and perfumes and cosmetics. Its brands include: Louis Vuitton, Fendi, Givenchy, Tag Heuer, Hennessy and Moet & Chandon. The Paris-based company said Monday that watch sales in 2011 grew 98%, due to the acquisition of Bulagri and a 41% increase in its own product sales.

Investor takeaway: The company's shares are up 21% this year and have a three-year average annual return of 47%, resulting in an $84 market value. The French company does not get U.S. analyst coverage.

7. Gap ( GPS)

Company profile: Gap is a specialty retailer that sells casual apparel under the store brands Gap, Old Navy, Banana Republic, Piperlime and Athleta. The company operates more than 3,100 corporate-owned stores worldwide.

Investor takeaway: Shares are up 17% this year and have a three-year average annual return of 26%. Morningstar analysts say "Gap consistently generates healthy profit margins and strong cash flow, thanks to prudent expense management even through weak economic cycles." S&P's survey of analysts found three "buy" ratings, two "buy/holds," 27 "holds" and two "sells."

6. Marriott International ( MAR)

Company profile: Marriott operates more than 3,500 hotels in more than 50 countries, including 9% of all hotel rooms in the U.S. Its brands include Marriott, J.W. Marriott, Ritz Carlton, Courtyard by Marriott, Fairfield Inn & Suites by Marriott, Residence Inn and Renaissance Hotels.

Investor takeaway: The company's shares are up 24% this year and have a three-year average annual return of 35%. The company has a $12 billion market value and its shares have a dividend yield of 1.11%. Investors clearly expect to see more corporate and recreational travel as the economy improves, which is driving the shares up. Marriott also just announced plans to return over $3 billion to shareholders in the next three years through dividends and share repurchases.

5. Harley-Davidson ( HOG)

Company profile: Harley-Davidson has a fabled brand as the world's leading manufacturer of heavyweight motorcycles, parts and accessories. A new Harley costs about $14,000.

Investor takeaway: Its shares are up 19% this year and have a three-year average annual return of 51%. Morningstar says the company "has historically generated a strong free cash flow, and we expect it to continue to do so, producing $3 billion of cumulative free cash flow over the next five years." It has a 1.08% dividend yield. Its shares have a market value of $10.5 billion. S&P has it rated "hold," with three stars and says that its target market, baby boomers, is aging and will begin to shy away from the big bikes.

4. JCPenney ( JCP)

Company profile: JCPenney is the leading mall-based family department-store operator in the U.S., with over 1,100 retail locations as well as catalog/Internet operations.

Investor takeaway: Its shares are up 17% this year and have a three-year average annual return of 38%. The stock has a 1.95% dividend yield.

JCPenney continues to have "good cash flow, which should grow with the recovery," said Morningstar. "Even projecting low-single-digit top-line growth and modest long-term operating margin assumptions, its cash-generation potential should become evident." Analysts are all over the map on it, giving it four "buy" ratings, two "buy/holds," eight "holds," three "weak/holds" and one "sell," according to an S&P survey.

3. Coach ( COH)

Company profile: Coach makes handbags and leather accessories in an assortment of styles and is known for its distinctive luxury brands. It sells brand-name goods, including handbags, leather accessories, business cases, footwear, jewelry, sunwear, travel bags, watches and fragrance products. It's seeing huge sales growth in China and Japan. Handbags sell for up to $420.

Coach posted earnings of $1.18 per share on a 15% sales increase in its most recent fiscal quarter ending Dec. 31, beating the consensus estimate of $1.15 per share. Its earnings are up from $1 per share in the same period last year.

Investor takeaway: Its shares are up 19% this year and hit a 52-week high on Friday of $71.50. S&P has it rated "strong buy" with five stars and an $80 price target.

2. Delphi Automotive ( DLPH)

Company profile: Delphi is one of the largest auto-parts suppliers in the world and its products include electronics, powertrain and safety items. It was originally General Motors' (GM) parts business, but was spun off and taken public in 1998. It filed for bankruptcy in 2005 and emerged in the third quarter of 2009.

Investor takeaway: Its shares are up 43% this year, including 38% in the past month. S&P doesn't rank the $10 billion market value company and it gets scant analyst coverage. But as new auto sales grow, it can't help but play a role in it as the key supplier to most of the world's biggest auto makers.

1. Tata Motors ( TTM)

Company profile: Tata Motors is India's largest auto manufacturer and it also makes commercial trucks and buses, and luxury vehicles, including the Jaguar and Land Rover. It also makes the world's cheapest and smallest car, the Nano. It has automotive operations in the U.K., Spain, South Korea, South Africa and Thailand. In 2011, it sold more than 1 million vehicles.

Investor takeaway: Up 52% this year, the stock has a three-year average annual return of 89%. S&P has it rated "buy" with four stars out of a possible five. It is the beneficiary of growing middle-class wealth in many emerging-market countries as it covers the spectrum of car types, from the cheapest to some of the most expensive.

>>To see these stocks in action, visit the 10 Spending-Spree Stocks Beating the Market portfolio on Stockpickr.
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