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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. He has been featured by CNBC, Fox Business, Bl...
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Dock David Treece
Dock David TreeceContributor
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. He has been featured by CNBC, Fox Business, Bl...
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Dock David TreeceContributor
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. He has been featured by CNBC, Fox Business, Bl...
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Michael Adams is an investing editor. He's researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world's major financial publicatio...
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Michael AdamsInvesting Editor
Michael Adams is an investing editor. He's researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world's major financial publicatio...
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Michael Adams
Michael AdamsInvesting Editor
Michael Adams is an investing editor. He's researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world's major financial publicatio...
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Michael AdamsInvesting Editor
Michael Adams is an investing editor. He's researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world's major financial publicatio...
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& 1 other
Updated: Jul 30, 2024, 8:21pm
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Whether they manufacture cars, design luxury goods or make fast food, consumer discretionary stocks profit from the full range of consumer goods and services. When you invest in consumer discretionary stocks, you’re buying companies that command strong brand loyalty among both their customers and investors.
To help you choose the best consumer discretionary stocks for your portfolio, Forbes Advisor has profiled the 10 largest in the industry by market capitalization.
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Show Summary
- Best Consumer Discretionary Stocks of September 2024
- Amazon.com Inc. (AMZN)
- Tesla Inc. (TSLA)
- LVMH Moet Hennessy Louis Vuitton SE (LVMHF)
- The Home Depot Inc. (HD)
- Toyota Motor Corp (TM)
- Hermes International SA (HESAY)
- PDD Holdings Inc. (PDD)
- McDonald’s Corp. (MCD)
- Nike Inc. (NKE)
- Booking Holdings Inc. (BKNG)
- Types of Consumer Discretionary Stocks
- Advantages of Investing in Consumer Discretionary Stocks
- Risks of Investing in Consumer Discretionary Stocks
- How To Buy Consumer Discretionary Stocks
- Next Up in Investing
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Best Consumer Discretionary Stocks of September 2024
Amazon.com Inc. (AMZN)
Market Cap
$1.9 trillion
Dividend Yield
n/a
10-Year Avg. Annualized Return
28.0%
$1.9 trillion
n/a
28.0%
Editor's Take
Seattle-based Amazon was started by Jeff Bezos as an online bookstore, before expanding into CDs and other media. Since then, Amazon has grown in tandem with the internet as a whole to become one of the most valuable public companies on earth. Today, you can buy just about anything on Amazon, which has expanded into businesses as varied as cloud computing and brick-and-mortar retail.
Note that Amazon famously does not pay out any dividends.
Tesla Inc. (TSLA)
Market Cap
$569 billion
Dividend Yield
n/a
10-Year Avg. Annualized Return
29.1%
$569 billion
n/a
29.1%
Editor's Take
The market leader in luxury electric vehicles and an emerging player in solar power, Tesla’s growth in recent years has been incredible. While recent supply chain challenges have kept the company from meeting production guidance, the company continues to report very strong quarterly earnings. Tesla’s vehicles are so popular that industry news sites track the length of waiting lists for each of its models.
Tesla does not pay any dividends.
LVMH Moet Hennessy Louis Vuitton SE (LVMHF)
Market Cap
$399 billion
Dividend Yield
1.7%
10-Year Avg. Annualized Return
17.3%
Editor's Take
LVMH is a Paris-based conglomerate that owns many familiar luxury brands, such as wine and spirit brands Veuve Clicquot, Hennessy and Moet & Chandon; fashion icons Louis Vuitton and Christian Dior; and jewelry brands TAG Heuer and Tiffany & Co. This makes LVMH the leading stock for all things luxury.
The Home Depot Inc. (HD)
Market Cap
$344 billion
Dividend Yield
2.7%
10-Year Avg. Annualized Return
17.9%
$344 billion
2.7%
17.9%
Editor's Take
Founded by Bernie Marcus and Arthur Blank in 1979, Home Depot started out with two warehouse stores in Atlanta. Since then, HD has grown to more than 2,200 stores in three countries. 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 options, including curbside pickup, buy at home/pickup in store and home delivery.
Toyota Motor Corp (TM)
Market Cap
$286 billion
Dividend Yield
1.9%
10-Year Avg. Annualized Return
9.0%
$286 billion
1.9%
9.0%
Editor's Take
Toyota Motors is the top-selling automaker in the U.S. market, surpassing rival GM’s sales in 2021. Founded in 1933 as a subsidiary of Toyota Automatic Loom Works, the company released its first production car in 1936. It suspended production of passenger cars during World War II to focus on trucks and didn’t resume production of passenger vehicles until 1947. Ten years later, Toyota released its first car in the U.S.
Hermes International SA (HESAY)
Market Cap
$256 billion
Dividend Yield
0.7%
10-Year Avg. Annualized Return
22.5%
$256 billion
0.7%
22.5%
Editor's Take
Hermes is a French luxury brand headquartered in Paris that sells goods online and in more than 300 stores around the world. The company specializes in clothes and accessories, jewelry and watches, perfumes and leather goods, all of which are considered ultra high quality. What makes Hermes unique is that, unlike some other luxury consumer goods companies, it markets products almost exclusively under a single brand. This strategy has helped make Hermes one of the most valuable brands around.
PDD Holdings Inc. (PDD)
Market Cap
$204 billion
5-Year Return
n/a
10-Year Return
n/a
$204 billion
n/a
n/a
Editor's Take
PDD Holdings is the parent company of Chinese online retailer Pinduoduo—known for its gamification of e-commerce, once-touted potential “Amazon-killer” Temu and a host of other businesses. The company was founded as Pinduoduo Inc. in 2015 and changed its name to PDD Holdings in February 2023. At which point, it also moved its headquarters to Dublin, Ireland.
McDonald’s Corp. (MCD)
Market Cap
$184 billion
Dividend Yield
2.6%
10-Year Avg. Annualized Return
12.7%
$184 billion
2.6%
12.7%
Editor's Take
McDonald’s began as a single hamburger stand in San Bernardino, Calif., that blossomed into an international franchise giant, practically inventing fast food along the way. By the early 21st century, McDonald’s had more than 34,000 stores in over 115 countries.
Nike Inc. (NKE)
Market Cap
$143 billion
Dividend Yield
1.6%
10-Year Avg. Annualized Return
10.7%
$143 billion
1.6%
10.7%
Editor's Take
Nike was founded in 1964 as Blue Ribbon Sports by University of Oregon track-and-field coach Bill Bowerman and Phil Knight, his former student. Blue Ribbon Sports launched Nike as a shoe brand in 1972, and in 1978 the entire company rebranded as Nike as it had become a more recognizable brand. By 2021, Nike had grown to more than 1,000 retail outlets worldwide, with sales in 170 countries.
Booking Holdings Inc. (BKNG)
Market Cap
$129 billion
Dividend Yield
0.9%
10-Year Return
11.9%
$129 billion
0.9%
11.9%
Editor's Take
One of the few remaining online companies that predate 2000’s dot com crash, Booking Holdings was previously known as The Priceline Group. The company changed its name to the current moniker in 2018.
Owner of online reservation service Booking.com, Booking Holdings also owns Agoda, Kayak and OpenTable. The three former services—Booking.com, Agoda and Kayak—all offer hotel, rental car and other vacation package services, while OpenTable offers restaurant reservation services.
*All data is sourced from StockRover, and is current as of June 5, 2024.
Types of Consumer Discretionary Stocks
Like every stock market sector, the consumer discretionary sector is divided into a number of sub-industries. Four of the larger consumer discretionary sub-sectors include:
- Retailers. A important part of this sector are companies that sell goods, rather than make them themselves. This includes online marketplaces or brick-and-mortar stores.
- Automobiles and automobile components. Automakers and automotive component manufacturers comprise a sprawling, globalized industry.
- Household durable goods. These include products that are purchased infrequently and tend to last for years, such as home appliances, furniture and mattresses.
- Hotels, restaurants and leisure. These companies are involved in running hotels, resorts, casinos, restaurants and cruises.
It’s also worth noting that these categories don’t just include companies that are directly involved in the sub-sector but can also include companies that support their operations, such as those that specialize in marketing or advertising for consumer discretionary products.
Advantages of Investing in Consumer Discretionary Stocks
They benefit from an expanding economy. When the economy is expanding, consumer discretionary stocks tend to see strong gains. They are what’s called cyclical stocks because they are directly dependent on economic cycles and consumer confidence. During good economic times, consumers are ready to spend on discretionary items.
Brand power. Consumer discretionary stocks benefit from the power of their brands. Strong brand names help these companies maintain dominant positions in their industries. Certain companies are also called “affinity stocks,” or companies that consumers want to invest in because they know and love their brands.
Risks of Investing in Consumer Discretionary Stocks
They suffer when the economy contracts. This is the flip side of being a cyclical sector: When economic growth slows or contracts, consumers hold back on making discretionary purchases, impacting the share values of companies in the sector.
Price-sensitive products. Unlike consumer staples stocks, which are companies that make products people need regardless of their preferences or economic well being, there is highly elastic demand for consumer discretionary goods. That means that more expensive goods are easily replaced by less expensive ones—or simply don’t need to be purchased at all.
Supply chain disruptions. Retailers and manufacturers of consumer discretionary goods are particularly exposed to problems from supply chain disruptions. Manufacturing of complicated durables and automobiles depend upon sprawling networks of suppliers, for instance, making them vulnerable to supply chain disruptions.
Inflation. 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.
How To Buy Consumer Discretionary Stocks
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.
A word of caution: Investors need to understand that buying shares of individual companies isn’t like buying a well-diversified index fund. Stocks can be much riskier, making it imperative to research stocks and review their financial statements before investing.
Read More: How To Buy Stocks
Rather than buying the shares of individual companies, diversify your exposure to consumer discretionary stocks by choosing a sector exchange-traded fund (ETF) or index fund. The Consumer Discretionary Select Sector SPDR Fund (XLY), for instance, gives you exposure to the entire sector for a low expense ratio of only 0.12%.
The author(s) held no positions in the securities discussed in the post at the original time of publication.
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