Some products sell for more than $5, but these are often an exception in relation to its broader product mix. Investors often look to the consumer discretionary sector as a beacon for the overall strength of the economy. A weakening of share prices across the broad consumer discretionary sector can serve as a leading indicator of an economic contraction.
However, when the economy is struggling, consumers may cut back on their spending on discretionary items. The entertainment industry has become an integral part of how we all live, love, and laugh. For most people, not a day goes by without consuming some form of non-essential media, such as books, magazines, music, TV shows, or movies. On a semi-regular basis, most people will attend a venue like a theme park or movie theatre. Their dedication to quality and consistency helps these entertainment stocks ride out waves of recession and bounce back when consumer spending power increases. Many of them share their earnings with consumers, making these stocks a great part of a dividend investing strategy.
Companies Mentioned in This Article
It expects revenues of $6.8 billion to $7.2 billion, with adjusted operating profits of approximately $1.05 billion at the midpoint of its revenue guidance. Creating uncertainty across the sector is stubbornly high inflation, a rising interest rate environment and anxiety over a potentially larger slowdown or recession in the U.S. economy. Dock David Treece is a former licensed investment advisor and member of the FINRA Small Firm Advisory Board. His focus is on breaking down complex financial topics so readers can make informed decisions.
Based on a 60% increase in Q4 2023, the brand will generate nearly $1.5 billion annually. As a result of this success, Tapestry launched a new program to build on its momentum. Key financial targets include $8 billion in annual revenue by the end of fiscal 2025, an operating margin of 19%, and earnings per share over $5. Should TPR achieve these goals, it won’t have a problem returning $3 billion through share repurchases and dividends over the next three years. As the company said in its fourth-quarter earnings release, it expects to open 70 Tractor Supply stores and rebrand 81 Orscheln Farm and Home rebrands this year. That’s expected to translate into revenue of at least $15 billion and net income of $1.13 billion.
- Like the consumer discretionary sector, the durable goods sector tends to be cyclical since its products are generally expensive purchases that consumers are more likely to make when the economy is strong.
- “In the home-improvement retail industry and others, I have seen strong fundamentals and low valuations – a combination that could be attractive for long-term investors.”
- Lucasfilm (Star Wars), Pixar (Toy Story) 20th Century Fox, Marvel, ESPN, and National Geographic have all joined the Disney family.
You may have the following questions about the consumer staples sector, which complements the consumer discretionary sector. Read on to learn more about the top consumer discretionary stocks on the market right now. To create a specific set of companies and their respective stocks that fall under certain criteria, we utilized a screener to examine the top stocks under each criterion. Benzinga offers a list of the best consumer discretionary stocks on the list above.
What are the different types of consumer discretionary stocks?
Recently, Men’sHealth revealed that Super Bowl MVP Patrick Mahomes, who won his second NFL Championship on February 12, wears a “lucky” pair of red Lululemon underwear for every football game he plays in. Some analysts have neglected to consider how popular its products are with celebrities and average consumers. Consumer discretionary stocks have been challenging places to invest in, but these picks could overcome several sector headwinds.
And the specialty retail industry includes clothing stores such as Nordstrom (JWN), electronics retailers like Best Buy (BBY) and home improvement stores such as Home Depot (HD). The leisure products industry is made up of companies that sell nonconsumable goods that are used for fun. Camping equipment companies such as Camping World (CWH) would fit into this category. Carmakers, clothing labels, restaurants and retailers all fit into one of its four industry groups.
What are some examples of consumer discretionary companies?
Keep reading to learn about the consumer discretionary sector and some top stocks to consider. Some causes of volatility for consumer discretionary stocks can include changes in interest rates. This is because low-interest rates make it cheaper for companies to borrow money, which can be used to invest in growth. The consumer discretionary sector is often one of the most volatile sectors in the stock market. Consumers tend to spend more money on discretionary items when the economy is doing well.
Secure Your Dividend Portfolio with a A Resilient Automotive Stock from the Consumer Discretionary Sector
Consumer discretionary companies, in contrast, are more economically sensitive with products like luxury goods, sports apparel, home renovations, gym memberships, restaurants, vehicles, and boats. Looking at the weekly chart below, you’ll notice that the company’s stock price outperformed the XLY ETF for much of 2021, but it has been strongly correlated in 2022. From a trader’s perspective, the slight uptick in recent weeks could suggest that the price will return to the type of relative outperformance that it was experiencing previously.
Consumer Discretionary Stocks to Buy: PVH Corp (PVH)
“Importantly, we expect BC to continue to gain significant market share in engines, while benefiting from a more modest boat pipeline refill opportunity as well as parts and accessories stabilization in 2023.” As a result of its value proposition, it has a history of delivering same-store sales growth even during recessions. That makes it one of the forex trading signals software to buy now. With that in mind, here are the nine best consumer discretionary stocks to buy now. This list includes equities highly beloved by Wall Street analysts, showing solid fundamentals and boasting attractive valuations.
Risks of Investing in Consumer Discretionary Stocks
Harley Davidson manufactures their motorcycles in Pennsylvania, Wisconsin, Brazil, and India—they will be closing their plant in Kansas City and opening one in Thailand. Though this could be viewed as a move to outsource labor, it could also Acciones de uber speak to their growing international popularity and market share. But “while most consumer discretionary stocks have been horrendous this year, we’ve had some pools of strength, too, and many of them can work in 2023,” according to Cramer.
Nevertheless, it’s possible that THO can rise compared to other consumer discretionary stocks because of the wealth gap. Essentially, the one segment of society that made out like bandits during Covid-19 was the exceptionally affluent. Should an economic downturn materialize, these are the folks that really won’t feel that much pain.
Coffee is undeniably a luxury that people can’t live without – or alternatively, won’t die from lacking it. When the economy starts going bad, people on a tight budget start looking for an alternative for their caffeine fix, such as buying it from the supermarket instead of ordering out. There are several ETFs that track the entire consumer discretionary sector, and there are also several that track specific consumer discretionary subindustries, like retail or video games. Another big-tent industry group is consumer services, which includes hospitality businesses and various subscription products. Then there’s the textiles, apparel and luxury goods industry, which includes jewelers like Brilliant Earth (BRLT) and clothing and footwear brands such as Nike (NKE) and Lululemon (LULU).
More recently, rising interest rates have the potential to cool economic growth, presenting a challenge for consumer discretionary companies in today’s stock market. Another benefit of investing in a Consumer Discretionary ETF is that investors are better able to diversify their portfolio. The long-term economic growth of such select sector mutual funds is often good enough to outperform what they would have been able to do with individual stocks to meet their investment objective for retirement.
The COVID-19 pandemic impacted the consumer discretionary sector differently than it did the consumer staples sector, which sells necessities. When looking for a good consumer discretionary stock, investors should consider factors such as the company’s financial stability, its ability to generate revenue and profit, and its competitive advantages. Investing in the consumer discretionary sector can be a great way to achieve long-term growth. If you do, you’ll be well-positioned to profit from the sector’s long-term growth potential. Another thing to look for when you’re searching for the best consumer discretionary stocks to buy is a history of dividend payments. Companies with a history of paying dividends are usually more stable and weather economic downturns better.
In this article we will take a look at the 15 different types of stocks to buy now. You can skip our detailed analysis of the consumer discretionary industry’s outlook for 2021, and go directly to the 5 Best Consumer Discretionary Stocks to Buy Now. As of April 2022, the company had more than 34,948 locations across the globe and expects to have 55,000 locations by 2030, indicating no shortage of growth opportunities. Long after Michael Jordan left the professional basketball court, Air Jordan shoes remain a mainstay of Nike’s business.
Given consumers don’t have to buy consumer discretionary products or services, many consumer discretionary companies do well when the economy is strong and they don’t do as well when the economy is weak. During times when the economy is strong, consumers generally have more money to spend and many consumers spend more on premium items or services they don’t necessarily need. When the economy isn’t strong, many consumers will spend less on discretionary items.