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Best Consumer Discretionary Stocks - Consumer Discretionary Stocks to Buy Now

Posted on Monday, December 9th, 2019 by MarketBeat Staff

Best Consumer Discretionary Stocks - Consumer Discretionary Stocks to Buy Now

Consumer discretionary stocks are issued by companies in the business of goods and services that are non-essentials. These non-essentials—such as entertainment, fashionable apparel, and automobiles—are available for purchase by consumers with disposable income (or a credit card).

Top Consumer Discretionary Companies in the World

These are the companies that have made a name for themselves in the consumer discretionary sector, showing long-term solid performance on the stock market. Through quality products, stellar brand building, and customer loyalty, they’ve become household names around the world for what they offer, whether it’s animated entertainment, travel and vacations, or vehicles.

Consumer Discretionary Sector

The consumer discretionary sector is not comprised of consumer staples like food or tech. Consequently, consumer spending power can make it fluctuate. During recessions, the consumer discretionary industry can take a hit, as consumers hold on to old vehicles instead of buying new ones and have less cash to spend on non-essentials like travel.

Because of their potential to fluctuate, consumer discretionary stocks are also referred to as the consumer cyclical sector. Consumer staples will always be in high demand, but discretionary items are not essential. To that end, market sectors like technology stocks and consumer staples (such as food) might have more balanced performances throughout the year.

However, consumer confidence and brand loyalty can stabilize the consumer discretionary sector. By and large, despite the waves of the market the biggest players in the consumer discretionary sector are stable Fortune 500 companies, and not necessarily the best growth stocks for short-term traders; however, long-distance investors will appreciate their stability, and in many cases, the dividends they pay.

The biggest players in this industry have been in business for decades—some even more than a century. Over those years, through quality products and solid management, they have solidified their footprint and positioned themselves to respond to rebound from bad times, while staying ahead of upstart competition.

Top Consumer Discretionary Companies in the World

If you’re wondering what stocks to buy, this stocks list will provide you with some of the biggest names in this global industry.

GM, or General Motors (NYSE: GM), has been designing, producing, and selling motor vehicles since 1908. It’s the largest car manufacturer in the United States, and one of the largest in the world. GM has recently been ranked #10 on the Fortune 500 list of American corporations in terms of revenue. Chevrolet, Buick, GMC, and Cadillac are their core brands, and a quick look at other vehicles on the road will tell you their domestic share is extremely large. But GM has not been content to only produce motor vehicles for the American people.

GM expanded operations overseas by purchasing a share of foreign brands like the Australian Holden, and the Chinese brands Wuling, Baojun, and Jiefang. However, a Chapter 11 bankruptcy filing forced them to shed Saturn, Pontiac, and Hummer just ten years ago. GM also develops tech and propulsion systems for the US military and has recently gotten involved in ride-sharing through their service Maven. This indicates that this automobile manufacturer is poised to stay strong even if automobile ownership declines.

Marriott (NASDAQ: MAR) is an international hospitality corporation that operates a broad range of hotels around the world, from luxury destinations like the Ritz Carlton to extended-stay lodging like the Fairfield by Marriott. Marriott is the third-largest hotel chain in the world, with over 7,000 properties under its umbrella, and over 1.3 million rooms. Of course, the Marriott brand is a central component to their portfolio, with 567 hotels and 201, 366 rooms around the world.

Marriott has built a solid reputation for itself as a quality purveyor of business and personal travel. Both Forbes and Time have ranked it as one of the best companies for employees. It’s hard to believe that this global conglomerate started as a pair of hotels in the 1950s, one of which was a Quality Inn outside the Washington D.C. airport. The way that Marriott has aggressively expanded in the ensuing seven decades, without losing any quality points along the way (and in fact, only improving their brand image) speaks to its more-than competent management and corporate vision.

United Airlines (NASDAQ: UAL) is the third-largest airline in the world in terms of global network and the size of its airplane fleet—comprised of almost 800 Boeing and Airbus craft. This major American airline is headquartered in Chicago, with hubs around the United States and a big presence in the Asian-Pacific region. United was formed after the merger of several diverse brands in the 1920s. 100 years later, United Airlines is a founding member and leading player of the Star Alliance, a 28-member international alliance of carriers that is the world’s largest such partnership.

Since commercial airliners are responsible for so much of the world’s greenhouse gas emissions (a whopping 98 percent), United has committed itself to an environmental strategy to reduce the company's carbon footprint. They have invested $30 million in Fulcrum BioEnergy, a company that produces alternative fuel, to create five refineries near United Hubs. As part of this plan, United will become the largest consumer of alternative fuel, which is already powering some of its aircraft. While airlines are notorious for poor customer experience and very little leg room, United has strived to provide a better passenger experience. Its United Business Polaris class have seats that recline into a full bed and chef-prepared meals served on a tablecloth.

Harley Davidson (NYSE: HOG) is the undisputed king of the road when it comes to hogs—the two-wheeled variety, that is. Harley Davidson is one of two American motorcycle manufacturers that survived the Great Depression (the other is Indian Motorcycle). The company has ridden out a number of business issues including corporate restructuring, international competition from Yamaha, and periods of poor sales and quality to become one of the top motorcycle manufacturers in the world.

Harley Davidson is one of the most iconic brands, with a fiercely loyal and devoted consumer base. The brand identity was built on retro-type cruiser motorcycles, though in recent years they have responded to consumer preferences by branching out into more contemporary models. 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 speak to their growing international popularity and market share.

Today, Disney (NYSE: DIS) is synonymous with American culture and influences the way people perceive Americans worldwide. From its humble beginnings with a series of animated features starring Mickey Mouse, Disney has become an international entertainment behemoth, producing televised entertainment, animated features, and live-action movies. Disney also operates its iconic brand of 12 theme parks in California, Florida, Tokyo, Paris, Hong Kong, and Shanghai.

Disney has expanded into other offerings, ending its competition with other entertainment giants by buying them. Lucasfilm (Star Wars), Pixar (Toy Story) 20th Century Fox, Marvel, ESPN, and National Geographic have all joined the Disney family. Mickey Mouse is one of the most recognized characters around the world, and many Disney films and animated features are culturally recognized staples around the world. With over 25 years on the Global Fortune 500, Disney is the undisputed leader in the entertainment industry and a highly lauded brand known for its commitment to customer loyalty and brand image.

Expedia (NASDAQ: EXPE) is an online search engine and travel agency. Users can book airline tickets, make hotel reservations, rent cars, and purchase vacation packages all from its user-friendly interface. Expedia actually began as a division of Microsoft in 1996, but in 2001 it was purchased by USA Networks. The first few years of the 21st century saw a proliferation of online services such as travel agencies. Companies such as Hotels.com, Travelocity, Hotwire, and Orbitz were a few of the other names that established themselves as venues for self-booking, but Expedia acquired them all, and a few others to boot.

Expedia has been named by Fortune as one of the most admired internet companies, just ahead of Amazon and behind Google. Forbes has also named Expedia one of the 400 best-managed public American companies with revenues over $1 billion.

Ford (NYSE: F) is an international carmaker headquartered just outside of Detroit. The company was founded in 1903 by Henry Ford, who revolutionized the transportation industry by creating the automobile assembly line. By 1914, his industrial model was the standard around the world. Today, Ford sells cars under its own brand name, along with luxury cars under the Lincoln brand. Ford also has an international stake in Britain’s Aston Martin, China’s Jiangling Motors and Changan Ford, along with other brands in Brazil, Taiwan, Thailand, Turkey, and Russia.

Though Ford suffered in the most recent financial crisis of 2001—even coming close to bankruptcy—it remains the second-largest car manufacturer in the U.S. and the fifth-largest worldwide. While the company is publicly traded, the Ford Family still retains 40% voting rights through the power of their special Class B shares of stock. Based on global revenue, Forbes is the 11th-most prosperous American-based company according to Fortune.

Delta (NYSE: DAL) is the world’s second-largest airline in terms of passengers and fleet size, with over 900 aircraft operating out of 52 different countries on six continents. This massive airline, with a company slogan of “keep climbing,” is ranked 69th on the Fortune 500 list. Delta is based in Atlanta, Georgia, which also happens to be its largest hub. There are nine other hubs throughout the United States.

In 2005, the company filed for bankruptcy due to rising costs of fuel. During this time, they fended off a hostile takeover from U.S. Airways. In 2008, Delta was already back to expanding, with its acquisition of Northwest Airlines. Delta is a member of the SkyTeam Alliance, a network of 19 different carriers serving 630 million passengers annually. They own a sizeable share of Aeromexico and Virgin Atlantic in addition to operating their own name brand and wholly-owned subsidiaries.

Royal Caribbean Cruises Ltd. (NYSE: RCL) is a cruise line based in Miami, Florida—a fitting destination, considering that many of their cruises travel around the Caribbean. Its central brand, Royal Caribbean International, is the largest cruise line in terms of revenue, but the second-largest in terms of passenger count.

Royal Caribbean Cruises are an upscale venue, but still accessible to the average consumer. Royal Caribbean Cruises Ltd. also owns Celebrity Cruises, another venue known for providing a quality experience for its passengers. Royal Caribbean operates a fleet of 26 ships, and in the recent race to build mega-sized cruise ships, they have frequently garnered the first-place prize. The mega cruise ship, Symphony of the Seas, is over 228,000 tons and has a span of more than 1,100 feet. Royal Caribbean’s biggest direct competitor is Carnival Cruises, which has mostly projected an image of fun and affordability in contrast to Royal Caribbean’s image of affordable luxury.

AMC Theatres (NYSE: AMC) is the largest movie theater chain in the world, with more than a thousand theatres and over 11,000 screens—outpacing the second place, UK-based Cineworld (793 theaters, around 9,500 screens) and the US-based Cinemark (533 theaters and almost 6,000 screens). AMC owns almost twice the number of movie theaters and screens as their closest domestic competitor.

AMC was founded in 1920, right when the movie industry was first starting to take off. AMC theatres changed the industry by creating the concept of a cinema multiplex—initially, a movie theater had only one theater until AMC changed that paradigm.

AMC struck innovative gold again in 1995 when they opened the first American megaplex cinemas in Dallas, Texas. This giant facility could accommodate thousands of viewers at any one time. AMC was the first theater to introduce stadium-style seating and removable armrests, which are now standard features of many movie theaters.

Airline Stocks

The airline industry is around a century old, which is a fairly long time in terms of business. Though there are around 5,000 airlines around the world, in reality most of them are wholly-owned subsidiaries of other companies—the four that really matter are American Airlines, Delta, Southwest, and United.

Though the airline industry is considered consumer discretionary, it is still an integral part of many business operations in terms of shipping and business travel—and there’s a good chance these four flyers will continue to monopolize the market for long-distance travel. Trains and boats are no longer an effective way to travel long distances and there is nothing to replace commercial airliners in the foreseeable future. This makes airline stocks a fairly stable investment. However, the industry can see some impact from fluctuating fuel prices and disastrous events that shake consumer confidence.

Hotel Stocks

Hotel stocks are issued by hotels—a truly discretionary economy since the majority of their occupants are traveling for pleasure. In the same way that airplanes monopolize long-distance travel, the hospitality industry monopolizes lodging arrangements—at least they did until the advent of the "share economy," with disruptors like Airbnb. However, even these upstart companies have not yet been able to dethrone the hotel industry in terms of market share. With the size and clout of hospitality giants like Marriott, Wyndham, Hilton, and Best Western, there’s a good chance the hotel industry will have a good comeback to the challenges of a changing landscape.

Though the consumer cyclical stocks list contains a number of diverse industries, some are more cyclical than others. The securities issued by companies in the hospitality industry can be some of the more cyclical stocks, just because the travel industry itself is very seasonal in nature.

Entertainment Stocks

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. Though consumer tastes are constantly changing, the giants of the entertainment industry (for example, Disney) have built up so much strength over the years that they can respond very quickly to new trends and retain the loyalty of their devoted consumers. 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.

Best Consumer Discretionary ETF

Experienced investors can look for the biggest stock gainers or choose the best companies based on solid fundamental analysis or number crunching and their own investing experience. But investors who do not have millions to build a portfolio or financial expertise to leverage might consider investing in one of the many exchange-traded funds. Similar to mutual funds, it’s a way for less-experienced investors to avoid the risks of attempting to build equity from common stocks on their own.

Another benefit of investing in a Consumer Discretionary ETF is that investors are better able to diversify their portfolio. A $1,000 might only buy ten shares of a particular consumer discretionary stock, but when invested in a mutual fund, it can be pooled with other investor contributions and spread out over hundreds, if not thousands, of different investments. 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.

One of the best lists of ETFs for consumer discretionary stocks is the Select Sector SPDR selection, managed by State Street Global Advisors. The name SPDR fund comes from an abbreviation of the first fund in the company, the Standard & Poor's Depositary Receipts, which tracks the performance of the S&P 500. There are many different options of Sector SPDR, including the S&P International Consumer Discretionary Sector ETF and the Consumer Discretionary Select Sector SPDR Fund (NYSE: XLY).

Creating profit margins or becoming one of the dividend aristocrats in any of the stock sectors requires hard work and analysis of everything from earnings reports to market capitalization. It is usually better for the retail investor to place their money into a mutual fund or ETF and let it go on autopilot until they need it for retirement.

Top Consumer Discretionary Stocks

Consumer discretionary stocks are issued by companies that produce durables, entertainment, automobiles, and provide travel experiences, for example. Though consumer durables are not consumer staples, the companies in this industry—especially the ones we’ve mentioned—are solid investments.

The biggest names in the consumer discretionary sector might not be the most active stocks, but they are very dependable, and many of them pay good dividends. Since the industry is comprised of companies that cater to consumer needs for non-essentials, the sector can see some impact from financial downturns in the economy or events that shake consumer confidence—whether that’s a movie that bombs the box office or a flight that crashes.

Consumer discretionary stocks might be a little more volatile than consumer staples stocks. However, for the most part, these sizeable Fortune-500 companies are able to ride out bad periods by leveraging the brand loyalty and solid business presence they’ve built, making them good choices for long term investors.

Companies Mentioned in This Article

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
General Motors (GM)$34.91-0.2%4.35%5.69Buy$47.17
Marriott International (MAR)$144.12-0.2%1.33%37.34Hold$139.50
Marriott Vacations Worldwide (VAC)$124.44+0.6%1.74%53.87Buy$131.17
Harley-Davidson (HOG)$35.17flat4.26%13.63Hold$37.71
Walt Disney (DIS)$144.01+0.3%1.22%20.69Buy$155.80
Expedia Group (EXPE)$110.03-0.1%1.24%32.94Hold$139.32
Ford Motor (F)$9.16-0.5%6.55%22.34Hold$10.83
Delta Air Lines (DAL)$59.64-1.2%2.70%8.15Buy$66.75
Royal Caribbean Cruises (RCL)$129.13-0.4%2.42%14.13Buy$147.30
AMC Entertainment (AMC)$6.97-2.9%11.48%-5.91Buy$14.77

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