U S. Consumer Discretionary Sector Analysis

With products that range from cars to lipstick, the consumer discretionary sector covers a vast range of industries. For the consumer discretionary sector, State Street Global Advisors (SSGA) offers one of the market’s top options. These consumers, however, still need to buy consumer staples—such essential and basic household items as toilet paper, paper towels, food, beverages, and gas. The Consumer Discretionary group has plenty of great stocks, but investors should always be looking for companies that are outperforming their peers. Is Central Garden (CENT Quick QuoteCENT – Free Report) one of those stocks right now?

Still, discretionary spending could remain strong among higher-income consumers who feel less squeezed by rising costs. Buying several individual stocks can be costly — both in terms of share prices, and in terms of the time you should spend researching those stocks. Another big-tent industry group is consumer services, which includes hospitality businesses and various subscription products. The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

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Lower earnings will bring down the performance of the consumer discretionary sector. Like every other business, consumer discretionaries must grapple with conditions out of their control. Factors such as high shipping, energy and labor costs can cut into earnings in recent years.

You can buy shares of consumer discretionary stocks in a taxable brokerage account or an individual retirement account (IRA)—a few 401(k) plans may also allow you to purchase individual stocks. If you’re just getting started in investing, or want to change up your platform of choice, check out our listings of the best online brokers and the best investment apps. Modest profit margins on goods and services in the consumer discretionary market make these stocks very sensitive to increasing inflation. Since consumers can choose not to purchase discretionary goods or substitute less expensive versions, companies that produce these goods become riskier as prices rise. Investors often turn their attention to consumer confidence when deciding between these two sectors.

Advantages of Investing in Consumer Discretionary Stocks

The stocks of consumer discretionary companies tend to lead a general stock market decline at the beginning of a recession. Consumer staples include food, beverages, drugs, hygiene products and medical supplies. Consumer staple stocks, such as Johnson & Johnson, Procter & Gamble, and Coca-Cola tend to perform better than consumer discretionary stocks during weak economies, but lag them during strong economies. Consumer staple stocks are often held in portfolios as a defensive investment to counter the volatility of consumer discretionary stocks in a weak stock market. These non-essential goods, products and services carry popular designer names like Michael Kors and Ferrari, and also include restaurants, coffee shops and golf courses.

The company remains committed to serving do-it-yourself (DIY) consumers, selling everything from tools and building supplies to gardening materials and home appliances. Recent years have also seen growth of new customer service https://1investing.in/ options, including curbside pickup, buy at home/pickup in store and home delivery. The market leader in luxury electric vehicles and an emerging player in solar power, Tesla’s growth in recent years has been incredible.

The total cost received by the writing party (or parties) was $78.7K, with a price of $225.0 per contract. There were 908 open contracts at this strike prior to today, and today 699 contract(s) were bought and sold. • For SBUX SBUX, we notice a put option sweep that happens to be bullish, expiring in 36 day(s) on October 20, 2023.

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Supply-chain disruptions also made it difficult for many companies to get supplies or put goods on shelves, which dents revenue. With higher interest rates, it eventually becomes more expensive for consumers to borrow, meaning their purchases of nonessential and luxury goods decreases. In addition, with interest rates rising on other items, consumers’ overall cost of living increases, giving even more reason to cut back on nonessential purchases. While factors such as rising interest rates can slow consumer spending, other factors, such as wage growth, can catalyze more spending. Consumer spending is a significant leading indicator for the broader economy. Our editors are committed to bringing you unbiased ratings and information.

This group includes 282 individual stocks and currently holds a Zacks Sector Rank of #14. The Zacks Sector Rank gauges the strength of our 16 individual sector groups by measuring the average Zacks Rank of the individual stocks within the groups. Find Consumer Discretionary investments  Search stocks, ETFs, and mutual funds in this sector. Access to our research can help you better understand the industries and companies that make up this sector, with timely performance data and stock, mutual fund, and ETF screeners. At the same time, the restaurant chain still has an emphasis on value that keeps customers coming back for more, plus its drive-thrus helped it weather the pandemic better than many others. Although it’s a restaurant chain, the emphasis on value gives it some elements of a consumer staples company.

They do well when the economy is doing well, or when the company has an innovative enough product that it encourages consumers to buy. Researching an ETF is often easier than researching individual stocks, but it’s still worth doing, since ETFs are not without risk. Make sure you check out an ETF’s holdings and expense ratio — the percentage fee the fund charges each year — before investing. You can also buy a wide variety of consumer discretionary stocks at the same time through an ETF.

What are the different types of consumer discretionary stocks?

Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. The household durables industry manufactures products that cannot be consumed immediately and are bought only infrequently. Examples of household durable goods include lawn and garden equipment, home and office furnishings, appliances, photographic equipment, and sporting goods. Examples of restaurant, hotel, and leisure companies include McDonald’s (MCD) and Carnival Corporation (CCL), a cruise vacation company.

• Consumer staples, on the other hand, are items that consumers cannot forgo even when economic conditions turn sour.
• It uses a very strict definition of “staples” — basically, “things you can’t live without.” As you’ll see in the next section, many common housewares are also considered consumer discretionary products.
• Whales are entities with large sums of money and we track their transactions here at Benzinga on our options activity scanner.
• To break things down more, Central Garden belongs to the Consumer Products – Discretionary industry, a group that includes 26 individual companies and currently sits at #75 in the Zacks Industry Rank.

McDonald’s is a perfect example of a consumer discretionary stock. Its earnings grow more slowly when consumers are concerned about inflation or a possible recession. The Consumer Price Index is one measure of consumer sentiment that affects stocks. This index tracks the average change in prices over time for a basket of consumer goods and services.

Conversely, consumer staples stocks can be more resilient to changes in the business cycle since they provide essential items like food and beverages. Companies like Procter & Gamble (PG), Coca-Cola (KO), and Hershey (HSY) belong to this group. XLY tracks an index of consumer discretionary stocks in the S&P 500. The fund has about $19 billion in assets under management and an expense ratio of 0.10 percent. Some of its top holdings include Tesla (TSLA), Nike (NKE), and Starbucks (SBUX). The diversified consumer services industry includes companies that provide services, such as education, home security, legal advice, interior design, and consumer auctions.

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The discretionary category can include cars, luxury goods, clothing, sports equipment, movies, furniture, and services such as hotels, restaurants, TV or any other leisure. You can buy the stocks of companies found in the various industries within the consumer discretionary sector. For convenience and diversification purposes, you can buy a mutual fund that invests in them, such as the Vanguard Consumer Discretionary Index Fund Admiral Shares.

For instance, as the U.S. economy gathered steam since the Great Recession of 2008, consumer discretionary stocks have posted positive returns. In the 10 years ended March 25, 2018, where can i find my tax identification number india the consumer discretionary sector returned 224.82%, while the S&P 500 index gained 94.51%. Consumer discretionary stocks are cyclical, meaning they tend to follow economic cycles.

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If a brand is a referral partner, we’re paid when you click or tap through to, open an account with or provide your contact information to the provider. Partnerships are not a recommendation for you to invest with any one company. Use the table below to compare your options and find the best fit. Our experts picked 7 Zacks Rank #1 Strong Buy stocks with the best chance to skyrocket within the next days. Whales are entities with large sums of money and we track their transactions here at Benzinga on our options activity scanner.

At management’s urging, shareholders voted this month to increase the company’s share count to add equity and fund expansion efforts. While that dilutes the value of current shares, Workhorse is gambling that it could pay off in the long run. The company still has dreams of making electric commercial vehicles and catering to the last-mile delivery market.

While hospitality is a popular sector, you can also buy restaurant, automobile and clothing stocks. As long as the economy is advancing, these stocks will generally perform well. Because of this, investors often buy these stocks when they expect an economic expansion. If they think the economy is about to undergo a contraction, they will sell their consumer discretionaries.