Companies in the consumer discretionary sector sell non-essential goods and services, such as appliances, cars and entertainment. Consumer Discretionary companies tend to be more sensitive to the whole business cycle because consumers are more likely to reduce or postpone discretionary purchases when times are tough. Therefore, discretionary stocks outperform the overall market during economic expansions, but underperform it during economic contractions.
On the other hand, companies in consumer staples sector sell essential items such as food and beverages, which are less sensitive to economic cycles. Prominent examples of consumer staples companies are The Home Depot, Inc. (HD) and McDonald’s Corporation (MCD).
Consumer discretionary stocks, which are represented by a exchange-traded fund (ETF)—the SPDR Select Sector Consumer Discretionary ETF (XLY) – underperformed the broader market, providing investors with a full return -7.8% compared to Russell 1000 total return of -5.5% over the past 12 months. These market performance figures and all data in the tables below are as of August 10, 2022.
Here are the top three consumer discretionary stocks with the best value, fastest growth and most momentum.
These are the consumer discretionary stocks with the lowest 12 months follow-up price/earnings ratio (P/E). Since profits can be returned to shareholders in the form of dividends and redemptions, a low P/E ratio indicates that you pay less for every dollar of profit generated. But they could also turn out to be a classic case of a value trap.
|Best Value Consumer Discretionary Stocks|
|Price ($)||Market Cap (Market Cap) ($B)||12 month price/earnings ratio|
|Macy’s Inc. (M)||6:30 p.m.||4.9||3.5|
|Thor Industries Inc. (THO)||88.20||4.8||4.5|
|Lennar Corp. (LEN.B)||68.65||20.0||4.7|
- Macy’s Inc.: Macy’s is a retail company that operates brick and mortar stores, e-commerce mobile sites and applications. It operates under the Macy’s, Bloomingale’s and bluemercury brands. Its products include apparel, accessories, home furnishings and various other consumer goods.
- Thor Industries Inc.: Thor Industries is one of the world’s largest manufacturers of recreational vehicles, comprising dozens of brands such as Airstream, Heartland, Jayco, Keystone and Starcraft. The company sells its products primarily in North America and Europe. Thor announced a strategic partnership with battery company Dragonfly Energy in July. The partnership includes a $15 million investment that will target the deployment of Dragonfly’s energy storage technologies in Thor RV products.
- Lennar Corp. : Lennar is a residential construction company that manufactures single and multi-family homes. It also offers residential and commercial services mortgage services, title insuranceand closing services. On June 22, Lennar announced a quarterly report dividend of $0.375 per share for its Class A and Class B common shares. Dividends were payable on July 21, 2022.
These are the top consumer discretionary stocks ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and last quarter year-on-year earnings per share (EPS) growth. Sales and profits are critical factors in the success of a business. Therefore, classifying companies according to a single measure of growth makes a classification sensitive to accounting anomalies in this trimester (such as changes in tax laws or restructuring costs) that may render one figure or another unrepresentative of the business as a whole. Companies with quarterly EPS or revenue growth greater than 2,500% were excluded as outliers.
|Fastest Growing Consumer Discretionary Stocks|
|Price ($)||Market capitalization ($B)||EPS growth (%)||Revenue increase (%)|
|Marriott Vacations Worldwide Corp. (VCA)||144.95||5.9||1,880||18.9|
|Hilton Worldwide Holdings Inc. (HLT)||133.66||36.7||187.0||68.6|
|Marriott International Inc. (TUE)||161.24||52.3||60.9||69.5|
- Marriott Vacations Worldwide Corp. : Marriott Vacations Worldwide is a global vacation company offering vacation properties, rentals, resorts and related products and services. It also operates exchange networks and membership programs around the world. Marriott Vacations Worldwide announced its second quarter 2022 results on August 8. Net income attributable to common shareholders increased nearly 23 times as revenue grew more modestly year-on-year. Strong growth in the company’s Vacation Ownership business helped fuel results.
- Hilton Worldwide Holdings Inc.: Hilton Worldwide Holdings is a holding company which, through subsidiaries, provides global hotel products and services. It includes 18 brands around the world.
- Marriott International Inc.: Marriott International operates and franchises hotels and other vacation properties. Its products also include resorts. The company also offers a travel program. In its second quarter 2022 earnings release, released August 2, Marriott announced net revenue growth of 60.7% year-on-year. Revenue grew nearly 70% over the same period, driven by soaring customer travel demand following a pandemic-related slowdown.
here are the consumer discretionary stocks which had the highest total return over the past 12 months.
|Consumer discretionary stocks with the most momentum|
|Price ($)||Market capitalization ($B)||Total return over 12 months (%)|
|H&R Block Inc. (HRD)||45.47||7.3||88.2|
|AutoZone Inc. (AZO)||2,223.27||43.3||36.1|
|Penske Automotive Group Inc. (CAP)||117.33||8.7||34.2|
|Russell 1000 Index||N / A||N / A||-5.5|
|SPDR Consumer Discretionary ETF (XLY)||N / A||N / A||-7.8|
- H&R Block Inc.: H&R Block provides tax preparation services through its subsidiaries. The company offers in-person, online, mobile and desktop services tax preparation services, as well as small business financial services. On August 9, H&R Block announced a 7% increase in its quarterly dividend. The dividend of $0.29 per share is payable on October 3 to shareholders beginning September 8, 2022.
- AutoZone Inc. : AutoZone sells and distributes automotive parts and accessories. It provides replacement parts, accessories and maintenance items for cars, SUVs, vans and light trucks. The company has locations in the United States, Mexico and Brazil.
- Penske Automotive Group Inc.: Penske Automotive Group is a major international transportation services company that sells cars and trucks. It operates commercial automobile and truck dealerships across the United States and in the United Kingdom, Canada, Japan and other countries.
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