As August heats up, so does our pilgrimage back to the classroom. Whether we’re sitting in the little desks at the lower school or trying to spruce up a dorm room that looks like a Soviet-era mental institution, parents are spending. I can verify this as I prepare to pack a rental truck and ship my oldest son off to his freshman year of college.

It’s not cheap.

According to the National Retail Federation, 2018 consumer spending for back to school and college is expected to reach $82.8 billion, down ever so slightly from last year’s $83.6 billion. No matter how you slice it, that’s a lot of crayons, glue and No. 2 pencils.

So, whether you’re preparing to wait in a carpool traffic line or rejoicing that those days are over for you, here are three of my favorite ideas for profiting from the back-to-school rush.

Newell Brands, Inc. (NYSE: NWL) – If you were going to own just one “back-to-school” stock, it would be this one. Having dropped the Rubbermaid from its name (don’t worry, they still own the brand), Newell’s brand portfolio is an all-star team of consumer names. While shoppers may be snapping up the company’s Paper Mate, Elmer’s, Sharpie, and Rubbermaid products this time of year, other names such as Mr. Coffee, Coleman, Graco, and Marmot clothing also keep the cash rolling in.

Doing the math, the company’s numbers are solid: 25% average annual earnings per share (EPS) growth over the last 5 years with 28% average annual revenue growth for the same period. Currently the company has $2.28 billion in cash which comes out to be $4.69 in cash per share and the stock trades at 30% discount to the company’s tangible book value. Shares are attractively priced at $20.64 with a forward PE of 8.45 and a 4.4% dividend yield.

International Paper (NYSE: IP) – While the globe’s largest paper manufacturer does crank out a buttload of writing and printing paper (known in the business as uncoated stock), the company’s biggest revenue driver is in containerboard and packaging products. Any uptick in consumer demand and activity will raise IP’s boat as well.

Having followed the stock for most of my career, IP management has always had a solid reputation of delivering. EPS have grown at an impressive 24% average annual rate over the last 5 years despite flat revenue over the same stretch. This is the result of superior execution of a long-range restructuring and cost savings plan. Shares currently trade around $52.30 with a bargain forward PE of 9.95 and a 3.6% dividend yield.

CVS Health Corp (NYSE: CVS) – Outside of back-to-school check-ups or vaccinations at CVS’s Minute Clinic platform (what many analysts, including yours truly, consider the integrated healthcare company of the future), a “back-to-school” stock may be stretching things a bit. However, there’s always that initial wave of routine illnesses, such as colds or stomach bugs a few weeks following the beginning of classes, which may cause a slight uptick in clinic and pharmacy visits.

Last year, I published an article taking a look at the future of American healthcare. I’m still sticking with my thesis of CVS (after its purchase of health insurer Aetna) being what the future of consumer healthcare will look like. The stock is extremely compelling with a forward PE of just 9.8 and a 2.9% dividend yield. Shares trade at $68.88, an 18% discount to their 52-week high.

Risks To Consider: Currently, the biggest risk facing consumer spending is the economy itself. While both GDP and job growth have recently come in on the strong side, the Trump administration’s fixation on trade war saber rattling is starting to inspire a little market nervousness. Weaker financial markets can have a cascading effect on the overall economy thus trickling down to the consumer level and suppressing demand. That risk, though, seems remote as we are already in the back-to-school spending cycle and initial indicators point to robust results.

Action To Take:  All three stocks trade at a forward PE almost half that of the market average and a combined dividend yield of 3.6%, which is 100% higher than the yield of the S&P 500. All three companies are solid, franchise players with excellent operating histories. When the market comes around to these stocks, patient investors could see gains north of 20% even with modest expansion of the forward PE.

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