In this article, we will take a look at the 5 best consumer discretionary stocks to buy according to hedge funds. To see more such companies, go directly to 15 Best Consumer Discretionary Stocks to Buy According to Hedge Funds.
5. The TJX Companies, Inc. (NYSE:TJX)
Number of Hedge Fund Holders: 73
Off-price department store company The TJX Companies, Inc. (NYSE:TJX) ranks 5th in our list of the best consumer discretionary stocks to buy according to hedge funds.
Insider Monkey’s database of 943 hedge funds shows that 73 funds have stakes in The TJX Companies, Inc. (NYSE:TJX) as of the end of the first quarter. The biggest hedge fund stakeholder of The TJX Companies, Inc. (NYSE:TJX) was Panayotis Takis Sparaggis’s Alkeon Capital Management which owns a $413 million stake in the company.
Artisan Global Equity Fund made the following comment about The TJX Companies, Inc. (NYSE:TJX) in its Q4 2022 investor letter:
“Also, shares of The TJX Companies, Inc. (NYSE:TJX), an off-price retailer of apparel and home goods across North America, Europe and Australia, rose on strong Black Friday sales and market share gains as shoppers searched for deals in physical stores. The company showed that it is maintaining margins and beating earnings estimates on strong sales and by selectively raising prices. TJX’s business model is to sell brand name and designer merchandise in limited quantities at every day discounted prices in stores with flexible, low-cost layouts. Its strategy is to tap into shoppers’ psychological need to “treasure hunt,” as the company describes it, to find unique, branded items at deep discounts. TJX buyers opportunistically purchase merchandise from vendors at deep discounts to keep the cost of goods low for stores. As the largest off-price retailer, the company has used its channel power to its advantage in recent months to gain steep discounts on merchandise as other retailers struggle to clear their inventory. We appreciate the company’s inventory management and pricing prowess. This holding is an example of our broad universe of companies that we consider for the portfolio and one that we believe is well-positioned for the current market environment.”
4. Booking Holdings Inc. (NASDAQ:BKNG)
Number of Hedge Fund Holders: 77
Booking Holdings Inc. (NASDAQ:BKNG) is trading higher after the company recently posted strong Q2 results, helped by a boost in leisure travel demand. Booking Holdings Inc. (NASDAQ:BKNG)’s adjusted EPS in the period came in at $37.62 beating estimates by $8.46. Revenue in the quarter jumped 27% year over year to $5.5 billion, surpassing estimates by $330 million. Room nights booked jumped 9% in the quarter on a year-over-year basis.
In the latest earnings call, Booking Holdings Inc. (NASDAQ:BKNG)’s management talked about its expectations for Q3 and full year:
“We expect Q3 sales and other expenses as a percentage of gross bookings to be about 20 basis points higher last year primarily due to higher gross bookings mix. We expect our more fixed expenses in Q3 to grow year-over-year about 30% due to higher personnel and related expenses, higher IT expenses including the impact of phasing from Q2, and higher indirect taxes in G&A. The year-over-year growth in our more fixed expenses includes about seven percentage points from changes in FX. The difference between the 20% growth in our more fixed expenses in Q2 and a 30% growth in Q3 is driven mainly by FX and major one. Taking all into account, we expect adjusted — we expect Q3 adjusted EBITDA to be around 20% higher than last year. Given the strong level of bookings that we’ve seen, we are updating our commentary for the full year.
We currently expect gross bookings to grow slightly over 20%, up from our previous expectation for low teens growth. We expect full year room night growth in the mid-teens and constant currency combination ADRs were up slightly for the year, including a couple of points of pressure from changes in regional mix. We currently expect revenue as a percentage of gross bookings to increase year-over-year by about 20 basis points down from our previous expectation of 50 basis points increase. The reduction in our full year take rate is driven by less of a benefit from timing including due to the higher growth rate we expected earlier in this year and also due to expanded booking window. Also, from stronger performance, which drove a higher mix of flights than expected earlier in the year.”
3. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 81
NIKE, Inc. (NYSE:NKE) is one of the best consumer discretionary stocks to buy according to hedge funds. Morgan Stanley recently made some changes to its Dividend Equity Portfolio. In the Consumer category NIKE, Inc. (NYSE:NKE) features on the portfolio as Morgan Stanley has an Overweight rating on the stock.
NIKE, Inc. (NYSE:NKE) in June posted mixed quarterly results as it missed EPS estimates for the fiscal fourth quarter. NIKE, Inc. (NYSE:NKE) however beat sales guidance. Its sales in China were also strong.
A total of 81 hedge funds out of the 943 tracked by Insider Monkey had stakes in NIKE, Inc. (NYSE:NKE) as of the end of the first quarter of 2023.
Ensemble Capital Management made the following comment about NIKE, Inc. (NYSE:NKE) in its second quarter 2023 investor letter:
“NIKE, Inc. (NYSE:NKE) (-9.7%): Nike struggled in the quarter as it continues to work off excess inventory built up during COVID and recalibrate its distribution channels between wholesale and direct-to-consumer selling models. Foot Locker, which is a major Nike retailer, fell after its second quarter earnings on news that it was aggressively marking down inventory, which investors took as a sign that Nike’s margins may suffer for the remainder of the year.”
2. Tesla, Inc. (NYSE:TSLA)
Number of Hedge Fund Holders: 82
Tesla, Inc. (NYSE:TSLA) shares were trading in the red as of August 5 amid latest probes from regulatory authorities around its car systems and a decline in deliveries in China. Tesla, Inc. (NYSE:TSLA) sold 64,285 China-made electric vehicles in July, down 31% from June. This also marked the lowest levels of deliveries 261,105 passenger vehicles.
A total of 82 hedge funds tracked by Insider Monkey were bullish on Tesla, Inc. (NYSE:TSLA) as of the end of the first quarter of 2023. The most notable hedge fund stakeholder of Tesla, Inc. (NYSE:TSLA) during this period was D. E. Shaw with a $1.3 billion stake in the company.
Baron Opportunity Fund made the following comment about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2023 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) designs, manufactures, and sells EVs, related software and components, and solar and energy storage products. Following a sharp decline at the end of 2022, Tesla’s stock rebounded in the first quarter of 2023 on investor expectations that Tesla will continue to grow vehicle deliveries and maintain solid gross and operating margins despite a potential recession, competition in China, and vehicle price reductions. We wrote a long piece on Tesla last quarter and refer readers back to it, because for long-term investors not much has changed over the last three months. Tesla did hold its first Investor Day in March, and several Baron analysts and portfolio managers attended. We toured the Austin Gigafactory, drove in a Cybertruck, boarded a Semi truck, and spoke with a wide swath of Tesla senior managers. During the formal presentation, Tesla highlighted, among other things: (1) its broad and deep bench of executive talent supporting CEO Elon Musk; (2) its “Master Plan 3–Sustainable Energy for All of Earth,” which featured EVs, renewable power from solar and wind, and stationary electric storage; (3) its vehicle assembly innovations, including massive casted parts (building Model Y bodies with single front and rear castings, replacing a substantial number of parts and fastening steps), a stainless steel exoskeleton (for Cybertruck), and its next-generation highly efficient “unboxed process” for its next-gen $25,000 vehicle; (4) a future permanent[1]magnet electric motor that will not require any rare earths; and (5) the massive untapped market opportunity for commercial stationary electric storage, branded Megapack, as the world steadily shifts to renewable energy. As long-term shareholders, we have witnessed Tesla exploit its innovative Model 3/Y now-global mass-market platform to increase vehicle deliveries from barely a standing start to over 1.3 million units, while achieving industry-leading margins and reinforcing its iron-clad balance sheet to almost $23 billion in cash (and effectively no recourse debt). We expect Tesla’s
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ:AMZN) tops the list of the best consumer discretionary stocks to buy according to hedge funds. Amazon.com, Inc. (NASDAQ:AMZN) is in the limelight after the company posted strong Q3 guidance as its Q2 results also beat estimates. Needham analysts Laura Martin and Dan Medina upped their price targets for Amazon.com, Inc. (NASDAQ:AMZN) stock to $160 from $150. The analysts praised Amazon.com, Inc. (NASDAQ:AMZN)’s cost-cutting measures and high margins. They also like Amazon.com, Inc. (NASDAQ:AMZN)’s AI initiatives.
A total of 243 hedge funds tracked by Insider Monkey reported owning stakes in Amazon.com, Inc. (NASDAQ:AMZN) as of the end of the first quarter. The biggest stakeholder of Amazon.com, Inc. (NASDAQ:AMZN) during this period was Natixis Global Asset Management’s Harris Associates with a $2.4 billion stake.
The Ithaka Group made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its second quarter 2023 investor letter:
“Founded in 1994, Amazon.com, Inc. (NASDAQ:AMZN) has evolved from its early roots as an online bookstore to become one of the world’s largest eCommerce retailers. At the end of 2022 Amazon stood poised to capture ~40% of all US e-commerce sales, representing five times more share than the next closest competitor. In addition to eCommerce, Amazon Web Services (“AWS”) has become the market leader in outsourced cloud infrastructure. Further, Amazon Advertising is garnering significant share in digital advertising, particularly product placement ads, thanks to consumers beginning their product searches on Amazon’s site. Despite providing tepid forward guidance on its 1Q23 earnings call, Amazon’s stock appreciated on the back of increased confidence the company would be able to contain expenses and push operating margins above prior peaks in the near-to medium term.”
You can also take a peek at 20 Best Burger Chains in the US and 10 Oversold Blue Chip Stocks To Buy.
