While you might already know that you can invest in consumer staples like food and tobacco products, you might not know that you can also invest in what people buy when they have more to spend. Consumer discretionary stocks come from companies that produce goods and services that consumers can choose to purchase but are not considered essential to their day-to-day lives. These products are non-essential or discretionary and are generally not required for survival or basic needs.
When it comes to consumer discretionary stocks, how can you screen investments, what are examples of them, and where should you begin searching for the right assets to add to your portfolio?
Read on to learn more about the top consumer discretionary stocks on the market right now.
Overview of Consumer Discretionary Stocks
What are consumer discretionary stocks?
Consumer discretionary stocks represent products people buy when they have excess money, but they also tend to stop purchasing during periods of economic hardship.
Consumer discretionary companies may operate in various industries, including luxury fashion, luxury consumer goods, entertainment and more. The MarketBeat top consumer discretionary stocks list includes companies like Nike Inc. (NYSE: NKE) and The Walt Disney Company (NYSE: DIS).
Benefits of Investing in Consumer Discretionary Stocks
What are the benefits of investing in consumer discretionary stocks? Let's take a look:
- Potential for higher returns through growth: Consumer discretionary stocks can offer high growth potential, as the companies that produce non-essential goods and services may see increased demand during periods of economic growth. These cyclical stocks show enhanced returns when the consumer market is strong. As the economy grows and consumers have more disposable income, they tend to spend more on discretionary items.
- Exposure to consumer trends: Consumer discretionary stocks can expose investors to changing consumer trends and preferences, such as shifts towards sustainable or digital products.
- May pay dividends: The best consumer discretionary stocks may also pay dividends in addition to providing higher growth rates, providing an attractive return rate to investors.
Downsides of Investing in Consumer Discretionary Stocks
It's worth noting the downsides of investing in consumer discretionary stocks before you choose this investment option:
- Economic sensitivity: Consumer discretionary stocks are sensitive to economic and consumer behavior changes. When the economy is weak or consumers are cutting back on spending, consumer discretionary stocks may suffer. These downturns may happen suddenly, resulting in losses that occur as quickly as any gains you see.
- Competition: The consumer discretionary sector is highly competitive, with many companies vying for limited market share. Competition can pressure profit margins and limit your growth potential as an investor.
11 Best Consumer Discretionary Stocks
Ready to learn what are examples of consumer discretionary stocks? Explore consumer discretionary stocks on sale using our list of the top market controllers today.
Amazon.com Inc. (NASDAQ: AMZN) is one of the largest e-commerce companies in the world. It offers various products and services, including online shopping, cloud computing, digital streaming, and more. The company has recently expanded into new physical markets, such as healthcare, grocery and advertising. As of March 2023, Amazon.com has returned more than 8% to investors this year.
LVMH Moët Hennessy
LVMH Moët Hennessy (EPA: MC) is a multinational luxury goods conglomerate based in France. The company formed in 1987 through the merger of champagne producer Moet et Chandon, cognac producer Hennessy and Louis Vuitton, a fashion house. Today, LVMH Moet Hennessy is the largest luxury goods company in the world, with over 70 high-end brands in its portfolio. Some examples include Christian Dior, Bulgari and Benefit Cosmetics.
Netflix Inc. (NASDAQ: NFLX) is a subscription-based streaming service that offers its subscribers a wide variety of TV shows, movies, documentaries and other video content. The company was founded in 1997 and initially operated as a DVD-by-mail service before transitioning to entirely online programming. Today, Netflix maintains one of the largest streaming infrastructures in the United States, with a total market capitalization of more than $130 billion.
The Walt Disney Corporation
The Walt Disney Corporation (NYSE: DIS), sometimes called "Disney," is a global media and entertainment conglomerate based in the United States. The company was founded in 1923 and has since become one of the world's largest and most influential entertainment companies. It operates in multiple entertainment sectors, including cable and broadcast television networks like ABC and ESPN, theme parks and resorts and film and television production. In March 2023, Disney had over $170 billion in assets under management.
lululemon athletica Inc.
lululemon athletica Inc. (NASDAQ: LULU) is a Canadian athletic apparel company specializing in yoga and other fitness-related clothing and accessories. The company has gained a strong consumer following thanks to its high-quality materials and innovative designs combining function and fashion. In addition to athletic apparel, the company also operates its lululemon sweat collective, which allows company enthusiasts to access discounts on live athletic classes and events. As of March 2023, lululemon had a total market capitalization of more than $37 billion.
Activision Blizzard Inc.
Activision Blizzard Inc. (NASDAQ: ATVI) is one of the largest American video game providers. Some of Activision Blizzard's most well-known games include Call of Duty, World of Warcraft and Overwatch. In addition to its gaming operations, Activision Blizzard also operates a film and television studio called Activision Blizzard Studios, which produces content based on its popular game franchises. As of March 2023, the company had a total market capitalization of more than $60 billion.
Best known for its athletic apparel and footwear, Nike Inc. (NYSE: NKE) has leveraged high-profile athlete endorsements and sponsorship deals to build brand recognition and popularity. It is currently one of the largest sportswear brands in the world, with a total market capitalization of more than $180 billion as of March 2023.
Nike has also made significant efforts to promote social responsibility and sustainability in its operations, with initiatives such as its "Move to Zero" program to reduce carbon emissions and its support of various social and environmental causes.
Sony Group Corporation
Sony Group Corporation (NYSE: SNY) is a leading Japanese multinational corporation specializing in electronics, gaming, entertainment and financial services. The company was founded in 1946 in Tokyo and has since grown to become one of the world's largest and most diversified corporations. Some of the company's most iconic products include the Walkman, popularized in the 1980s, the PlayStation gaming console and its legendary movie studio, Sony Pictures. In March of 2023, Sony had a total market capitalization of more than $105 billion.
Marriott International Inc.
Marriott International Inc. (NASDAQ: MAR) is a leading American multinational hospitality company that operates and franchises a series of hotels and lodging facilities worldwide. In addition to its hotel operations, Marriott offers various other services, such as event planning and management, vacation ownership, and corporate housing. As of March 2023, the company had Marriott locations in more than 130 unique countries and a total market capitalization of $50 billion.
Warner Bros. Discovery Inc.
Warner Bros. Discovery Inc. (NASDAQ: WBD) resulted from a merger between WarnerMedia and Discovery Inc. The new company controls a vast collection of media channels and programming umbrellas, including TNT, TBS, Cartoon Network, Discovery Channel, Animal Planet, the Food Network and more. It also supports its own series of streaming services to compete in the space against other consumer discretionary giants like Netflix. In March of 2023, Warner Bros. Discovery had a total market capitalization of $35 billion.
The Comcast Corporation (NASDAQ: CMCSA) is the largest cable television provider in the United States and one of the largest broadband Internet providers. Comcast provides a range of services to residential and business customers, including cable television, internet, home phone and home security services. In addition to its cable and internet services, Comcast also owns several media companies, including NBCUniversal, which includes television networks such as NBC and Telemundo. It also owns Universal Pictures, a major movie studio. As of March 2023, Comcast had almost $150 billion in its total global market capitalization.
Tips for Investing in Consumer Discretionary Stocks
Adding a few consumer discretionary stocks to your portfolio can be rewarding, but it's essential to do your research before investing. Use the following tips before choosing which assets to buy and sell.
- Understand the industry: Consumer discretionary stocks closely link to the state of the economy. These stocks tend to perform well when consumers have higher disposable income and are confident about the future, but they present the most economic opportunities when times are tough. It's important to understand the industry and the current economic conditions before investing to find an ideal entry point.
- Identify companies with potential: When you think it's time to buy, research and identify the key players in the industry. Look for companies with strong brand recognition, innovative products and growth history. This will help you identify potential investments that will likely perform well over the long term. You can use the MarketBeat stock screener to refine your search and make sorting assets easier.
- Keep track of changing company valuation and consumer trends: Keep track of companies' earnings reports to understand their financial performance. Look for companies that consistently report strong earnings growth, and add these companies to your portfolio for long-term holds.
Consider Investing in Consumer Discretionaries
While consumer discretionary stocks can provide valuable opportunities to investors, however, it's important to remember that these stocks show higher levels of volatility, which can impact you disproportionately in times of economic loss. Be sure to fully diversify your portfolio with a series of consumer staple additions or ETFs to maintain stability during these periods and better avoid panic selling.
You may have the following questions about the consumer staples sector, which complements the consumer discretionary sector.
What are the top five rated ETFs to buy?
When ranked by total market capitalization, the top five ETFs include the SPDR S&P 500 ETF Trust, iShares Core S&P 500 ETF, Vanguard Total Stock Market ETF, Vanguard S&P 500 ETF and the Invesco QQQ Trust. Keep in mind that the list of the best ETFs may constantly change depending on market capitalization fluctuations.
Does Vanguard have a consumer staples ETF?
Yes, Vanguard does operate a consumer staples ETF, referred to as the Vanguard Consumer Staples ETF (NYSE: VDC). Like other ETFs, you can buy and sell VDC throughout the same in the same way as normal shares of stock.
Is it better to buy consumer staples stocks or ETFs?
It's usually a better idea to invest in a consumer staples ETF rather than a series of singular stocks because it will diversify the sector. It's always a good idea to consult with an investing professional before deciding how to invest in the consumer staples sector.