The consumer discretionary sector consists of companies offering goods and services that are considered non-essential, and are purchased if consumers have sufficient incomes. Automobiles, durable goods, and apparel are examples of consumer discretionary products. Companies offering goods and services related to entertainment and leisure are also in the sector. The sector is dependent on consumer incomes, thus, is sensitive to the business cycle. By contrast, the consumer staples sector includes companies that offer essential items such as food, beverages, and household goods, and these businesses tend to be non-cyclical.

Well-known consumer discretionary companies include Nike Inc. (NKE), Ford Motor Co. (F), and Starbucks Corp. (SBUX). The sector, as measured by the Consumer Discretionary Select Sector SPDR ETF (XLY) has underperformed the S&P 500 by a narrow margin over the past year. XLY posted a 12-month trailing price change of 25.1% versus the 28.2% for the S&P, based on numbers as of January 6, 2020.

These are the top 3 consumer discretionary stocks with the best value, the fastest earnings growth, and the most momentum.

Best Value Consumer Discretionary Stocks

Here are the consumer discretionary stocks in the S&P 500 with the lowest 12-month trailing price-to-earnings (P/E) ratios in the sector. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Best Value Consumer Discretionary Stocks
  Price ($) Market Cap ($B) 12-Month Trailing P/E
Macy's Inc. (M) 17.10 5.3 5.4
General Motors Co. (GM) 35.84 51.2 5.9
Gap Inc. (GPS) 18.28 6.8 8.2
Source: Investopedia
  • Macy's Inc.: Macy's is a retailer that operates department stores offering a wide range of merchandise, including apparel, accessories, cosmetics, home furnishings, and other consumer goods. Macy's cut its 2019 profit forecast after reporting a drop in same-store sales during Q3 2019.
  • General Motors Co.: General Motors is a leading manufacturer of automobiles and trucks. In Q3 2019, GM reported a year-over-year (YOY) decline in net revenue and diluted EPS, partly due a protracted strike which ended in October.
  • Gap Inc.: Gap is a clothing and accessories retailer whose brands include Gap, Old Navy, Banana Republic, and Athleta. For Q3 2019, Gap reported a decline in comparable sales for Gap, Old Navy, and Banana Republic relative to the prior year.

Fastest Growing Consumer Discretionary Stocks

Here are the consumer discretionary stocks in the S&P 500 with the highest year-over-year earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.

Fastest Growing Consumer Discretionary Stocks
  Price ($) Market Cap ($B) EPS Growth (%)
Chipotle Mexican Grill Inc. (CMG) 858.02 23.8 155.1
Nordstrom Inc. (JWN) 40.98 6.4 107.7
Hilton Worldwide Holdings Inc. (HLT) 109.42 30.9 85.2
Source: Investopedia; Chipotle Mexican Grill, Nordstrom, Hilton Worldwide Holdings Investor Relations
  • Chipotle Mexican Grill Inc.: Chipotle owns and operates fast-casual, fresh Mexican food restaurants. The menu includes items such as burritos, tacos, burrito bowls, and salads. Chipotle crushed third-quarter earnings estimates after reporting adjusted EPS of $3.82, 19% above analyst estimates.
  • Nordstrom Inc.: Nordstrom is a fashion retail store which provides apparel, footwear, and accessories for women, men, and children. The company also offers a series of private label credit and debit cards to customers. Last quarter, Nordstrom posted an impressive gain in net earnings: $126 million in Q3 2019, up from $67 million in the third quarter of the prior year.
  • Hilton Worldwide Holdings Inc.: A holding company, Hilton Worldwide Holdings is best known for operating, through its subsidiaries, a worldwide group of hotels, timeshare properties, and resorts. Besides a big YOY gain in EPS, Hilton also saw a 77% YOY increase in net income to Q3 2019. The company approved more than 25,000 new rooms for development during the quarter.

Consumer Discretionary Stocks with the Most Momentum

These are the consumer discretionary stocks in the S&P 500 that had the greatest total return over the past 12 months.

Consumer Discretionary Stocks with the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Price Change (%)
Chipotle Mexican Grill Inc. (GMG) 858.02 23.8 88.6
Fortune Brands Home & Security Inc. (FBHS) 65.89 9.2 65.2
Tiffany & Co. (TIF) 133.65 16.0 62.2
S&P 500 (SPX) N/A N/A 28.2
Consumer Discretionary Select Sector SDPR ETF (XLY) N/A N/A 25.1
Source: Investopedia, Yahoo! Finance
  • Chipotle Mexican Grill Inc: See above for company description.
  • Fortune Brands Home & Security Inc.: Fortune Brands sells a variety of home goods, including plumbing, accessories, cabinetry, windows, and more. The company also specializes in security products and storage tools. For the most recent quarter, Fortune Brands reported a 6% YOY increase in sales, to $1.46 billion.
  • Tiffany & Co.: Through a series of subsidiaries, Tiffany manufactures and sells jewelry products worldwide. Tiffany recently announced a February stockholder meeting to determine whether the company will move forward with a proposed merger in which it will be acquired by LVMH Moët Hennessy Louis Vuitton SE.