At Half-time, We Already Have a Winner

July 29 (Bloomberg) -- On today's "Insight & Action," Adam Johnson looks at earnings season results on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Half the companies in the S&P 500 have reported earnings, and consumer companies selling products like clothes and movies are expanding the bottom line 12 percent from last year (more than double the average for the S&P 500).

"What about banks' 35 percent earnings growth" you ask? Their gains are coming from lower loan loss provisions and higher trading activity. Record low default rates mean the accretion of lower loss reserves is running out. So we look to cash earnings due to higher sales, and the consumer discretionary sector is selling plenty to willing buyers. U.S. personal consumption is near an all-time high $11.39 trillion on an annualized basis.

The S&P Consumer Discretionary sector is up 25.5 percent so far this year, and we want to find the companies best positioned to continue leading. So we've screened the 82 members according to three simple criteria:

Only five companies made the cut, and we note they are collectively growing earnings at a rate more than double their peers ... which also explains why they're up 31.4 percent this year. The leaders are CBS (CBS), Macy's (M), Priceline.com (PCLN), TJX (TJX), Time Warner (TWX).

Blog readers will appreciate several additional names which came very close to making our list. We omitted them from our on-air presentation because each had one sell rating (alas, they weren't perfect). Even so, we think they merit attention since they too are growing and outperforming. Note how many are media-related, reflecting growth through higher ad rates... a trend which further confirms our thesis about an improving consumer. Comcast (CMCSA), Coach (COH), Delphi (DLPH), Disney (DIS), 21st Century (FOXA).

This story originally appeared on the Insight&Action blog.

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