In this article, we discuss 5 of the best consumer discretionary stocks to buy. If you want to see more of the best consumer discretionary stocks to buy, the risk/reward and methodology of this list, go directly to 12 Best Consumer Discretionary Stocks to Buy.
5. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 71
Although it makes consumer staples such as laundry detergent, many of The Procter & Gamble Company (NYSE:PG)’s products are premium priced given the company’s position in the market. Given the higher inflation and economic uncertainty in the world, some consumers are buying less of The Procter & Gamble Company (NYSE:PG)’s products. As a result of the macro headwinds, The Procter & Gamble Company (NYSE:PG) sees FY23 EPS towards the low end of the previous guidance range. In the long term, however, The Procter & Gamble Company (NYSE:PG) has high quality earnings power that still make it attractive.
4. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 72
Premium footwear and apparel maker NIKE, Inc. (NYSE:NKE) has fallen 43% year to date as macro headwinds and industry specific challenges have weighed on the company’s earnings results. While the near term is still uncertain, Rick Patel of Raymond James takes the long view and has a $99 price target and an ‘Outperform’ rating given NIKE, Inc. (NYSE:NKE)’s competitive advantages. 72 hedge funds in our database were long NIKE, Inc. (NYSE:NKE) at the end of Q2 2022.
3. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 95
Netflix, Inc. (NASDAQ:NFLX) is a leading online video streamer that also produces entertainment content. If a recession occurs, Netflix, Inc. (NASDAQ:NFLX) could find it harder to grow its subscriber base as customers may choose cheaper alternatives for entertainment. Nevertheless, Netflix, Inc. (NASDAQ:NFLX) has potential if it can exceed the market’s earnings growth estimates for the future. As of Q2 2022, 95 hedge funds we track were long Netflix, Inc. (NASDAQ:NFLX).
2. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 109
The Walt Disney Company (NYSE:DIS) is a leading entertainment conglomerate whose shares are down 36% year to date. On October 26, Brandon Nispel of KeyBanc trimmed his price target to $143 from $154 on The Walt Disney Company (NYSE:DIS) but kept an ‘Overweight’ rating given negative macro trends could be a headwind for the entertainment company’s Media business.
Third Point commented on The Walt Disney Company (NYSE:DIS) in a Q3 2022 investor letter,
“As disclosed in our Q2 letter, we reinitiated a significant position in The Walt Disney Company (NYSE:DIS) when the company retested its Covid lows earlier this year. At the current price, Disney is trading for little more than the stand-alone value of its Parks business and a mere 15x ’24 “street” consensus. The company remains early in its Direct to Consumer (“DTC”) transition with a leading market position, and yet the current stock price ascribes negligible value to the streaming business. We believe this is due to questions around the terminal economics of streaming, given large losses being generated today at Disney (>$1 billion dollars last quarter) and stagnating margins at peers such as Netflix. On the last earnings call, management highlighted three items that could lead to an inflection in DTC profitability over the next 12 months: a 38% price increase for Disney+ in the US; moderating growth in cash content expense; and an advertising tier for Disney+ launching in two months that can drive additional ARPU given high demand for the Disney brand amongst advertisers.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 252
In addition to being a tech giant, Amazon.com, Inc. (NASDAQ:AMZN) is considered a consumer discretionary stock given the company often sells more premium priced products on its online platform that consumers don’t necessarily need. Given the inflation, Amazon.com, Inc. (NASDAQ:AMZN)’s growth has slowed as a result and with the 47% year to date decline in the stock, Amazon.com, Inc. (NASDAQ:AMZN) could be attractive long term given its earnings growth potential.
Diamond Hill Capital Management commented on Amazon.com, Inc. (NASDAQ:AMZN) in a Q2 2022 investor letter,
“Amazon.com, Inc. (NASDAQ:AMZN)’s shares underperformed as valuations of fast-growing companies continued to compress in Q2. Amazon’s growth investments over the past two years have pressured earnings as consumer demand has been weaker than anticipated. However, we believe the company will be able to grow into its infrastructure investments over time. These investments have obscured the magnitude of sustainable free cash flow as well as the attractive valuation of the business relative to peers.”
With 252 hedge funds in our database long Amazon.com, Inc. (NASDAQ:AMZN) at the end of Q2, the company ranks #1 on our list of 12 Best Consumer Discretionary Stocks to Buy.
You can also take a look at 20 Most Admired Companies in the World in 2022 and 15 Biggest Dow Companies By Market Cap.
